Running a business in Indonesia as a foreign company can be promising, but it also comes with complex details. Even experienced accountants can make small mistakes that lead to serious consequences such as fines, additional tax audits, or issues with government authorities. At Bright Solution Bali, we often work with clients who come to us after facing tax or investment reporting violations. Based on our experience, here are the three most common accounting mistakes made by foreign companies in Indonesia and how to avoid them.
Failure to Submit Quarterly LKPM Reports
Submitting LKPM (Investment Activity Reports) is an essential obligation for every company with foreign capital in Indonesia. However, many business owners see it merely as an administrative formality, when in fact, this report serves as a key indicator of compliance in the eyes of BKPM and the OSS system.
First Mistake
One of the most common mistakes is neglecting to submit investment reports regularly. Many new companies focus on operations and overlook the fact that this reporting obligation must be fulfilled every quarter
Case
One of our clients entrusted transaction recording to an internal accountant but failed to monitor reporting deadlines. As a result, the monthly reports were submitted late, and the quarterly investment report (LKPM) was never filed.
Risks
- Late submission penalties
- Company suspension in the OSS system
- Issues with business license renewal and employee KITAS extension
Solution from Bright Solution Bali
We conducted an internal review, identified the missing reports, and submitted a revised filing on time. The client successfully avoided additional sanctions and issues with BKPM.
(Sumber: jdih.maritim.go.id – Peraturan BPKM)
Incorrect Tax Calculation for Foreign Employees
Working with foreign professionals can bring many advantages to a company, especially in terms of expertise and international work standards. However, managing taxes for expatriates often becomes a confusing area due to differing regulations between resident and non-resident tax statuses.
Second Mistake
This mistake usually occurs due to a lack of understanding about the definition of “tax residency” in Indonesia. Many companies assume that foreign employees are automatically considered resident taxpayers, whereas this status actually depends on the length of stay and any bilateral tax treaties between countries.
Case
A company hired a foreign professional, but the accountant applied the tax rate for Indonesian residents even though the employee had not yet obtained tax residency status. As a result, the amount of tax paid was nearly half of what it should have been.
Risks
- Additional tax liabilities
- Fines and penalties for underpayment
- Reputational risk for the employer
Solution from Bright Solution Bali
We recalculated the tax using the correct rate, corrected the company’s reports, and assisted the employee in obtaining a Tax Identification Number (NPWP). This ensured accurate tax compliance and kept the company fully aligned with Indonesian regulations.
Failure to Withhold Article 23 Income Tax on Contractor Payments
Working with service providers or contractors is a common part of business operations, whether for short-term projects or professional work. However, many companies are unaware that every payment made to a third party carries specific tax withholding obligations, one of which is the Article 23 Income Tax (PPh 23).
Third Mistake
This mistake often occurs not because of an intention to evade taxes, but due to a lack of technical understanding. Many junior accountants classify service payments as regular operational expenses without withholding Article 23 Income Tax. In fact, this obligation is clearly regulated under Indonesian tax law and may result in additional tax bills if ignored.
Case
The company regularly hired contractors, but all payments were recorded as operational expenses without applying the required Article 23 Income Tax withholding.
Risks
- Additional tax assessments for the entire period
- Fines and interest for late payment
- Risk of being suspected of inaccurate reporting
Solution from Bright Solution Bali
We reviewed the company’s financial statements, identified the errors, and provided guidance on the correct calculation and withholding of Article 23 Income Tax. The company is now confident that its tax obligations are fully compliant with the regulations.
How to Prevent These Mistakes
At Bright Solution Bali, we offer an internal review service for accounting and tax reports. This service is not an official audit but a practical review that helps identify errors, inaccuracies, and potential penalties before they are discovered by the tax authorities.
First Step
This stage begins with an initial review of all reports and transactions. The goal is to gain a complete understanding of the company’s financial condition and identify potential errors before they develop into tax violations.
Review
- Analyze the submitted reports and transactions.
- Identify errors, potential penalties, and provide recommendations for improvement.
Second Step
Once the errors are identified, the next stage is to carry out corrective actions. Our team assists in adjusting the reports, preparing revised documents, and ensuring that all data complies with the applicable Indonesian tax regulations.
Correction
- Adjust the financial reports.
- Submit the revised documents.
- Provide recommendations for proper accounting practices going forward.
Key Deadlines in Indonesia 2025
Knowing reporting deadlines is an important step to ensure a company’s compliance with tax and investment regulations in Indonesia. Each type of report has a different schedule, and even a slight delay can result in fines or operational disruptions.
To stay on track, here is a list of key deadlines that foreign companies need to pay attention to throughout 2025:
Monthly Reports
- Tax payment: no later than the 10th of the following month
- Report submission: no later than the 20th of the following month
Investment Reports (LKPM)
- Quarterly: submitted no later than the 10th after the end of the quarter
Annual Reports
- Personal tax (Individual Tax Return): March 31
- Corporate tax (Corporate Tax Return): April 30
Conclusion
Accounting errors in Indonesia can be very costly, ranging from missed reports to incorrect tax calculations. By conducting an internal review with Bright Solution Bali, you can ensure your reports are accurate, timely, and fully compliant with regulations.
