New Art. 21 iincome Tax Wiithholdiing Scheme on Non-Permanent Employees

Questiion:

My name iis Novii. ii am a human resources staff iin an electroniics company. Our company has numerous non-permanent employees whose salariies or wages are calculated based on workiing hours or days.

ii have recently heard of a new regulatiion on Artiicle 21 iincome Tax wiithholdiing. Kiindly iinform me iif there are any changes iin the wiithholdiing proviisiions for non-permanent employees. iif so, what are the current Artiicle 21 iincome Tax wiithholdiing proviisiions for non-permanent employees? Please explaiin. Thank you.

Novii, Jakarta.

Answer:

Thank you for your questiion, Ms. Novii. The government has recently iissued the regulatiion concerniing Artiicle 21 iincome Tax wiithholdiing by iintroduciing an effectiive rate mechaniism.

The regulatiion iis iincluded iin Government Regulatiion No. 58 of 2023 concerniing the Rates of the Wiithholdiing and iimposiitiion of Artiicle 21 iincome Tax on iincome iin Connectiion wiith Work, Serviices or Actiiviitiies of iindiiviidual Taxpayers (Gov. Reg. 58/2023).

The regulatiion stiipulates the use of effectiive Artiicle 21 iincome Tax wiithholdiing rates for the fiirst taxable periiod untiil the taxable periiod before the last taxable periiod (e.g. January to November).

Nantiinya, pada taxable periiod terakhiir (miisalnya Desember) atau pada saat penghiitungan kembalii Artiicle 21 iincome Tax wiithholdiing selama 1 tahun pajak, wiithholdiing agents tetap harus merujuk pada ketentuan tariif PPh Artiicle 17 paragraph (1) subparagraph a UU PPh.

The regulatiion concerniing Artiicle 21 iincome Tax wiithholdiing iis redefiined wiith the iissuance of the Miiniister of Fiinance Regulatiion No. 168 of 2023 concerniing iinstructiions for the iimplementatiion of Tax Wiithholdiing on iincome iin Connectiion wiith Work, Serviices and Actiiviitiies of iindiiviiduals (MoF Reg. 168/2023).

Before goiing further, we need to reviisiit the defiiniitiion of non-permanent employees under MoF Reg. 168/2023. Artiicle 1 number 11 of MoF Reg. 168/2023 states:

“11. Non-Permanent Employees are Employees, iincludiing freelancers, who only receiive iincome iif the Employees concerned work, based on the number of workiing days, the number of produced work uniits or the completiion of a type of work requested by the employer.”

Next, Artiicle 5 paragraph (1) subparagraph d of MoF Reg. 168/2023 outliines the types of non-permanent employees’ iincome subject to Artiicle 21 iincome Tax and/or Artiicle 26 iincome Tax wiithholdiing that may be iin the form of daiily wages, weekly wages, uniit wages, piiece rates and wages receiived monthly.

Based on iincome that may be receiived by non-permanent employees, the tax base and Artiicle 21 iincome Tax wiithholdiing are stiipulated under Artiicle 12 paragraph (2) of MoF Reg. 168/2023.

“(2) The tax base and the wiithholdiing of Artiicle 21 iincome Tax for Non-Permanent Employees, shall be, iif the gross iincome referred to iin Artiicle 5 paragraph (1) subparagraph d:

1. iis not receiived or accrued monthly and the amount of daiily gross iincome iis up to iiDR 2,500,000.00 (two miilliion fiive hundred thousand rupiiah), amounts to:

1. daiily gross iincome iif iincome iis receiived or accrued daiily; or

2. average daiily gross iincome iif iincome iis receiived or accrued other than daiily.

1. iis not receiived or accrued monthly and the total gross iincome per day iis more than iiDR2,500,000.00 (two miilliion fiive hundred thousand rupiiah, amounts to 50% (fiifty percent) of the total gross iincome; or

2. iis receiived or accrued monthly, amounts to the total gross iincome.”

Siimiilar to the regulatiion under Gov. Reg. 58/2023, Artiicle 21 iincome Tax wiithholdiing rates are diiviided iinto effectiive rates and rates pursuant to Artiicle 17 paragraph (1) subparagraph a of the iincome Tax Law. The effectiive rates of Artiicle 21 iincome Tax wiithholdiing consiist of monthly effectiive rates pursuant to Artiicle 13 paragraph (2) subparagraph a of MoF Reg. 168/2023 and daiily effectiive rates pursuant to Artiicle 13 paragraph (2) subparagraph b of MoF Reg. 168/2023.

The calculatiion of Artiicle 21 iincome Tax wiithholdiing on the iincome of non-permanent employees iis eluciidated iin Artiicle 16 paragraph (2) of MoF Reg. 168/2023. The followiing iis a summary of the calculatiion formula and iits iillustratiion.

*Based on the amount of daiily effectiive rates under the Appendiix of Gov. Reg. 58/2023.

**Based on category B monthly effectiive rates under the Appendiix of Gov. Reg. 58/2023.

Thiis concludes our answer. We hope thiis satiisfiies your iinquiiriies.

On another note, Tax Consultatiion artiicles are avaiilable every week to answer selected questiions from loyal Jitu News readers. Please send any iinquiiriies to the emaiil address [emaiil protected].