The Government of the Republic of Indonesia, through the Directorate General of Taxes (DGT) has issued a new regulation, namely Regulation of Directorate General of Taxation No. REGULATION 23/PJ/2025 concerning Determination of Domestic Tax Subjects and Foreign Tax Subjects (Regulation 23/PJ/2025). This regulation was promulgated in December 2025 and serves as the latest administrative framework for assessing tax residency status for both individuals and entities under Indonesian tax law.
Regulation 23/PJ/2025 formally revokes and replaces earlier Director General of Taxes regulations that had governed similar matters namely PER-02/PJ/2009 and PER-43/PJ/2011, thereby consolidating the rules on tax subject determination into a single updated regulation.
Key Provisions
One of the most notable features of Regulation 23/PJ/2025 is its shift away from a predominantly formalistic approach toward a fact-based assessment. Under prior regulations, tax residency was often inferred mainly from the number of days spent in Indonesia or from legal registration status. While these indicators remain relevant, the new regulation makes clear that they are not decisive and must be considered together with the taxpayer’s actual circumstances.
For individuals, Regulation 23/PJ/2025 maintains the relevance of physical presence exceeding 183 days within a twelve-month period, but it supplements this with an examination of actual residence and habitual abode. The regulation recognizes that residency is not merely a matter of counting days but requires an assessment of where an individual’s personal, familial, social, and economic life is effectively centred.
Similarly, for entities, the regulation expands beyond a narrow focus on place of incorporation. While incorporation under Indonesian law continues to establish domestic tax subject status, Regulation 23/PJ/2025 introduces a substantive inquiry into where effective management, strategic decision-making, and operational control are exercised. This approach reflects an increased emphasis on economic reality and aligns more closely with international principles commonly applied in tax treaty interpretation.
Another significant change introduced by Regulation 23/PJ/2025 is the explicit integration of tax treaty considerations into the determination of tax residency. Where an individual or entity may be regarded as a tax resident both in Indonesia and in another jurisdiction, the regulation expressly provides that residency status must be resolved by reference to the tie-breaker provisions contained in the applicable tax treaty. This clarification is important because earlier regulations did not clearly address how conflicts between domestic residency rules and tax treaty provisions should be handled. As a result, taxpayers and tax authorities often faced uncertainty when dual residency situations arose. By expressly deferring to treaty tie-breaker rules, Regulation 23/PJ/2025 reinforces Indonesia’s commitment to its international tax agreements and provides a clearer and more consistent basis for resolving cross-border residency disputes.
Interaction with Other Tax Regulations
Regulation 23/PJ/2025 operates as an implementing regulation within a broader legislative and regulatory ecosystem. Its application cannot be separated from the Indonesian Income Tax Law, which determines the scope of taxation based on tax subject status. Individuals and entities classified as domestic tax subjects are subject to tax on their worldwide income, whereas foreign tax subjects are generally taxed only on income sourced from Indonesia.
Furthermore, the explicit reference to tax treaties reinforces Indonesia’s commitment to honouring international agreements. In cross-border situations involving expatriates or multinational entities, residency determinations under Regulation 23/PJ/2025 must be read together with treaty provisions to ensure consistency and avoid double taxation.
Practical Notes for Taxpayers
From a taxpayer’s perspective, Regulation 23/PJ/2025 underscores the importance of substance and documentation. Residency status is no longer determined solely by formal registration or travel patterns but by a comprehensive evaluation of factual circumstances. Taxpayers must therefore be prepared to demonstrate where they genuinely live, work, manage, or conduct business.
For individuals, this may require maintaining detailed records of presence, family location, employment arrangements, and economic activities. For those claiming foreign tax subject status, documentary evidence such as foreign domicile certificates and proof of substantive ties abroad becomes increasingly critical. Indonesian citizens living overseas should note that non-residency is not automatic and must be supported by objective indicators assessed holistically.
For entities, particularly multinational groups, the regulation highlights the need to carefully assess governance structures, management locations, and decision-making processes. Entities that are formally established outside Indonesia but effectively managed from within the country may face reclassification risks if substance points toward domestic control.
Conclusion
Regulation 23/PJ/2025 represents a significant change in Indonesia’s approach to tax residency determination. By emphasizing substantive connections over formalistic indicators, the regulation responds to modern economic realities while enhancing alignment with international tax standards. At the same time, it strengthens the DGT’s ability to administer residency rules more consistently.
For taxpayers, the regulation sends a clear signal that tax residency is no longer a mechanical exercise but a factual assessment grounded in real life and real economic behaviour. Understanding and anticipating how these criteria apply is therefore essential for managing compliance, mitigating disputes, and navigating Indonesia’s increasingly sophisticated tax environment.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
maser@metalaw.id
