Top 3 Accounting Mistakes in Indonesia — and How to Avoid Them
Running a business in Indonesia as a foreign-owned company involves many nuances. Even experienced accountants sometimes make mistakes that can result in fines, additional tax assessments, and issues with government authorities.
At Legal Indonesia, we frequently see company owners coming to us only after violations have already been identified. Based on our experience, we have outlined the three most common accounting mistakes.
Mistake #1: Failure to Submit the Quarterly LKPM Report
Case:
A client relied on an in-house accountant who recorded transactions but failed to monitor reporting deadlines. As a result, monthly reports were filed late, and the mandatory quarterly investment report (LKPM) was never submitted.
Risks:
Late filing penalties
Company suspension in the OSS system
Problems with license renewals and employee KITAS extensions
Our Solution:
We conducted an internal review, identified the missing report, and filed it on time. The client avoided penalties and further issues with BKPM (the Investment Coordinating Board).
Mistake #2: Failure to Withhold PPh 23 Tax on Contractor Payments
Case:
The company regularly engaged contractors, but the accountant classified all payments as “operating expenses” without withholding the mandatory PPh 23 tax.
Risks:
Back tax assessments for the entire period
Penalties and interest charges
Potential suspicion of inaccurate reporting
Our Solution:
During our internal review, we identified the error, corrected the financial statements, and provided the client with clear instructions on the correct calculation and withholding of PPh 23. The company is now confident that contractor taxes are being paid correctly.
Mistake #3: Incorrect Tax Calculation for a Foreign Employee
Case:
The company hired a foreign specialist, but the accountant applied the tax rate for Indonesian residents even though the employee did not have tax residency status. The tax was underestimated by almost half.
Risks:
Additional tax liabilities
Penalties and fines for underpayment
Reputational risks for the employer
Our Solution:
We recalculated the taxes using the correct rate, adjusted the company’s filings, and assisted the employee in obtaining an NPWP (Indonesian Tax ID). This reduced the employee’s overall tax burden and ensured compliance.
How to Prevent These Mistakes
We offer internal reviews of accounting and tax reports. This is not a formal audit but a practical check that helps identify errors, inaccuracies, and potential penalties before the tax authorities do.
Our Process:
Step 1. Review
Analysis of submitted reports and transactions
File with identified errors, penalties, and recommendations
Step 2. Correction
Adjustment of financial statements
Submission of revised documents
Recommendations for proper accounting practices going forward
Key Deadlines in Indonesia
Monthly reports:
Tax payments: by the 10th of the following month
Filing reports: by the 20th of the following month
Quarterly investment reports (LKPM):
By the 10th of the month following the quarter
Annual tax reports:
Personal tax return: by March 31
Corporate tax return: by April 30
Final Note
Accounting mistakes in Indonesia can be costly. A missed report, miscalculated tax, or improperly registered employee can lead to fines, suspensions, and unnecessary expenses.
Order an internal review with Legal Indonesia and ensure your reporting is in order. This will save you money, time, and stress.
Stay on top of these deadlines to avoid penalties. If you need assistance with report preparation, reach out to us — we’re here to help.
