Bali is not just a tourist destination; it’s a thriving hub for international businesses seeking to expand globally in 2025!

The Island adopts the Indonesian tax system, which can be quite different from what many foreign employers are familiar with. It is mostly a straightforward tax structure, but it does have some unique aspects that employers need to understand. 

If you’re planning to hire employees in Bali this year, our article will help you become familiar with the local payroll tax requirements so you can ensure compliance and avoid penalties.

We also provided a comprehensive guide on doing business in Bali if you would like a more detailed explanation. You can also visit here for proper payroll management in Bali.

What Is Payroll Tax in Bali?

As explained earlier at the beginning of this article, Bali adopts the Indonesian payroll tax system, which consists mainly of Income Tax (Pajak Penghasilan or PPh) and social security contributions. These taxes and contributions are used to fund healthcare, infrastructure development, education, and other social welfare programs in Bali. 

Other countries may have a specific “payroll tax,” but Indonesia has a different system that employers need to be aware of in 2025:

  • Income Tax (PPh 21): Income tax refers to the portion of tax that employers have to withhold from an employee’s salary, to be paid to the government. The progressive tax rates determine the calculation.
  • BPJS Employment (BPJS Ketenagakerjaan): Indonesia has a social security program for employment, covering work accidents, death benefits, old-age savings, and pension benefits. So when someone refers to BPJS employment, they simply mean everything under this category.
  • BPJS Health (BPJS Kesehatan): This is the contribution category for the national health insurance program that provides healthcare coverage to all workers in Indonesia.

Employer and Employee Responsibilities

In Bali, both the employers and employees have their individual tax obligations for Indonesia’s payroll system. As an employer, you are responsible for calculating and withholding Income Tax from employees’ salaries. You are expected to pay the employer’s portion of BPJS contributions and submit monthly tax returns so you can issue annual tax certificates to your employees. This simply means you must ensure timely payment of all tax and social security obligations each month.

Employees in Bali, however, need to make sure they provide accurate personal information for their tax calculation. They’ll be required to pay their portion of the BPJS contribution and submit an annual tax return. Make sure to always inform employers of any changes in tax status, such as marriage or additional family dependents.

Working with a recruitment agency in Bali can provide all the support you need to navigate the complex system as a foreign employer in Bali. They will also help ensure you comply with local regulations.

Here’s a detailed breakdown of who pays what in this section:

Breakdown of Employer Contributions

BPJS Employment (BPJS Ketenagakerjaan)

This social security program consists of four components, namely:

  • Work Accident Insurance (JKK): Employers contribute 0.24% – 1.74% of their monthly salary while employees contribute nothing.
  • Death Insurance (JKM): Employers contribute 0.3% of their monthly salary, while employees equally contribute nothing.
  • Old Age Security (JHT): Employers contribute 3.7% of the monthly salary, while employees contribute 2% of their monthly salary, which will be automatically withheld by the employer.
  • Pension Plan (JP): Employers contribute 2% of their monthly salary, while employees contribute 1% of their monthly salary, also withheld by the employer.

BPJS Health (BPJS Kesehatan)

Employers contribute 4% of their monthly salary, while employees contribute 1% of their monthly salary, which is withheld by the employer. Please note that expatriate employees working in Indonesia for more than six months are also required to join in these contributions.

Income Tax (PPh 21)

Employers do not contribute to income tax in Bali. They are only responsible for calculating, withholding, and remitting it to the tax authorities. Remember, we said the progressive tax rates in Indonesia determine the income tax?  

Well, resident taxpayers who earn an annual income up to IDR 60 million are expected to pay 5%. Those earning IDR 60 million to IDR 250 million must pay 15%, IDR 250 million to IDR 500 million pays 25%, IDR 500 million to IDR 5 billion pays 30%, while those earning above IDR 5 billion are expected to pay 35%.

Taxpayers who are non-residents only have to pay a flat rate of 20%.

Industry-Specific Tax Rates

The Indonesian government has industry-specific tax rates that employers in Bali need to consider if they are serious about getting tax considerations. The rates are determined by the industry your business falls into, and here’s a list of all of them;

Manufacturing and Labor-Intensive Industries

If your business operations fall into manufacturing and other labor-intensive industries, you may qualify for a tax incentive from the government. The Indonesian government is willing to reduce your business income tax rates to boost employment and economic growth in Bali.

Tourism Industry

Since Bali is a widely known tourist destination, businesses in the tourism sector need to note that there are no different payroll tax rates for them. Various regional taxes may apply, such as hotel and restaurant taxes that can affect overall operating costs. You should consider this if you are planning to set up a tourism business in Bali

Creative and Digital Industries

Indonesia has been promoting growth in creative and digital industries, so it favors creative businesses setting up in Bali because they will be given tax incentives. If you are a company in IT, design, or digital content creation, we recommend checking with tax authorities or consultants about potential benefits you stand to enjoy.

Risk Classification for Work Accident Insurance

While this is not an industry, the risk classification category is a contribution made towards the Work Accident Insurance (JKK). It is mostly determined by the risk level of the industry. Very low-risk industries like basic office work only need to contribute 0.24% of their monthly salary.

Companies in retail and hospitality are also classified as low-risk and only have to pay 0.54% of the monthly salary. Construction & mining industries are, however, classified as medium and high-risk industries, respectively, and they each have to contribute 0.89% and 1.27% of their monthly salary.

If your business isn’t in any of these categories and falls under the list of hazardous industries, you can expect a 1.74% contribution of your monthly salary.

What Are The Existing Tax Deadlines in Bali?

Staying on top of tax deadlines is very important for businesses operating in Bali. Income Tax reporting and payment must be done on or before the 10th of the following month, while BPJS contributions must be remitted by the 15th of the following month.

Annual tax return for companies in Bali is, however, due within four months after the end of the fiscal year, and the annual tax certificates for employees (for the previous year) must be issued on or before February ends.

If you fail to meet any of these deadlines,  it can result in penalties, and you may be fined a percentage of the unpaid amount.

For a detailed list of standard benefits in Bali, check out our guide on employee benefits in Bali. You also get to learn about the taxable and non-taxable incomes, like religious holiday allowances, meal and transportation allowances.

Simplify Payroll and Tax Compliance in Bali

The payroll tax system in Bali requires attention to detail and a good understanding of local rules.

For businesses looking to hire in Bali without establishing a legal entity, working with a Professional Employer Organization (PEO) can be an efficient solution. Our PEO services handle all aspects of payroll, tax compliance, and HR administration, allowing you to focus on your business activities.

Whether you’re hiring one employee or building a team in Bali, the guidelines outlined in this article will help you navigate Indonesia’s tax system confidently and focus on growing your business on this beautiful island.

For more information on hiring and doing business in Bali, contact our team of experts for support. They have been trained to provide the exact strategy your business needs for growth in 2025.

Frequently Asked Questions

Yes. If your employees are tax residents of Indonesia, you are required to withhold and pay income taxes and social security contributions even if they are remote workers.

Employers sometimes make mistakes in payroll tax calculations, and that can cost you a lot. We recommend using our payroll tax calculator to avoid inaccurate payroll tax management.

Yes. There are incentives if your business benefits the economy, but it depends on industry, investment size, location of your business, and alignment with national economic priorities.