The Portfolio With the Better Pre-Tax Return Isn't Always the One You Actually Keep More Of
6 min read
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6 min read
Say two friends each invest Rp200,000,000. One buys IDX shares. The other buys US stocks through a local app. A year later, the US-stock portfolio is up 17%. The IDX portfolio is only up 15%.
The US-stock investor made the better call, right? Not necessarily. Once you factor in what Indonesian tax actually takes from each portfolio, the friend with the lower pre-tax return can walk away with more money in hand. That is not a rounding error. It happens because IDX shares and foreign stocks are taxed under two completely different systems, and one of them is far gentler than most investors assume.
Your pre-tax return is the percentage gain before any tax is taken out. Your after-tax return is what is left once the tax bill is paid. For most investments those two numbers move together in a predictable way. In Indonesia, for stocks, they don't, because the tax rule depends on where the stock trades, not on how much you made.
IDX shares (stocks listed on the Indonesia Stock Exchange) are taxed under a flat, final tax: 0.1% of the gross value of every sale, withheld automatically by your broker. "Final" means that one deduction settles the tax bill completely, nothing more is owed later. The important part: it is 0.1% of what you sold the shares for, not 0.1% of your profit. It applies whether you sold at a gain or a loss.
Foreign stocks bought through a local Indonesian app are not covered by that flat tax. Their gains get folded into your regular taxable income and taxed under PPh Pasal 17, Indonesia's progressive tax system for individual income, the same set of brackets your salary is taxed under. Progressive means the more your total income is, the higher the rate on the portion above each threshold: 5% up to Rp60 million, 15% from Rp60 million to Rp250 million, 25% from Rp250 million to Rp500 million, 30% from Rp500 million to Rp5 billion, and 35% above that.
Here is the two friends' numbers side by side. Both start with Rp200,000,000.
| Portfolio A (IDX shares) | Portfolio B (foreign stocks) | |
|---|---|---|
| Pre-tax return | 15% | 17% |
| Sale proceeds | Rp230,000,000 | Rp234,000,000 |
| Gain before tax | Rp30,000,000 | Rp34,000,000 |
| How it's taxed | 0.1% final tax on Rp230,000,000 | Added to income, taxed under PPh Pasal 17 |
| Tax owed | Rp230,000 | Depends on tax bracket (below) |
Portfolio A's tax is simple: 0.1% of Rp230,000,000 is Rp230,000. That leaves a gain of Rp29,770,000 after tax, an after-tax return of 14.885%. Because the tax is based on the sale amount, not the profit, it barely dents the return at all.
Portfolio B's tax depends on which bracket the extra Rp34,000,000 falls into once it is stacked on top of the investor's other income for the year:
| Marginal bracket | Tax on the Rp34,000,000 gain | Gain after tax | After-tax return |
|---|---|---|---|
| 15% | Rp5,100,000 | Rp28,900,000 | 14.45% |
| 25% | Rp8,500,000 | Rp25,500,000 | 12.75% |
| 30% | Rp10,200,000 | Rp23,800,000 | 11.9% |
| 35% | Rp11,900,000 | Rp22,100,000 | 11.05% |
Tax owed = Gain × Marginal tax rate
Look at the top row. Even at the lowest bracket that could apply, Portfolio B's after-tax return (14.45%) is still below Portfolio A's (14.885%). At every higher bracket, the gap only widens. Portfolio A had the lower pre-tax return and still finished ahead, in every single scenario in this table.
If you already hold foreign stocks, you may know that Indonesian tax law lets you choose between two ways of calculating your cost basis, FIFO or average cost, and that the choice changes how big your reported gain is. That is a real and separate issue, covered in FIFO vs average cost basis. This post is about something that happens after your gain is already calculated: which of the two tax systems applies to it, and how differently each one behaves. Even with the same reported gain, an IDX sale and a foreign-stock sale are never taxed the same way.
If you hold both IDX shares and foreign stocks, don't rank them by pre-tax return alone. A foreign-stock position that looks like the stronger performer can hand back a meaningfully smaller share of its gain once PPh Pasal 17 applies, especially if you are already in a higher income bracket from your salary or other earnings.
Two practical takeaways. First, when you're deciding where to put new money, the after-tax outcome, not just the headline return, is what actually lands in your pocket. Second, the gap in this example (about 2.9 percentage points of after-tax return, at the 15% bracket alone) is not small once it compounds across several years or several trades.
You can see your realized and unrealized gains for each holding on NetWort's Gains page, broken down by position. It shows your pre-tax gain, which is the starting point for this kind of comparison, but it does not calculate an after-tax figure for you, since that depends on your personal tax bracket and filing details. Use the gain it shows you alongside the tax rules above to work out what you would actually keep, and confirm the exact numbers with a licensed tax adviser before you file.