SW ITU – Nota Dinas ND14-PJ-02-2024 V2_Eng_Final

OFFICIAL MEMORANDUM NO.ND-14/PJ/PJ.02/2024 AFFIRMATION OF THE IMPLEMENTATION MINISTER OF FINANCE REGULATION (PMK) NUMBER 66 OF 2023 CONCERNING INCOME TAX TREATMENT OF REIMBURSEMENT OR REWARDS IN CONNECTION WITH OCCUPATION OR SERVICES RECEIVED OR OBTAINED IN THE FORM OF BENEFIT IN KIND AND/OR ENJOYMENT

Official Memorandum No. ND-14/PJ/PJ.02/2024 dated July 8, 2024, aims to provide uniformity and legal certainty for implementing the Minister of Finance Regulation (PMK) No. 66 of 2023. Below are the key clarifications presented in Official Memorandum                                                             No. ND-14/PJ/PJ.02/2024:

• Scope of in-kind benefits or advantages related to employment or services

1. Compensation or remuneration related to work or services received or earned by employees or service providers in the form of salary, wages, allowances, honorariums, commissions, bonuses, incentives, gratuities, service payments, or other remuneration constitutes income subject to Income Tax (PPh). Such compensation or remuneration can be provided in the form of:

a) Money, or

b) In-kind benefits or advantages related to PMK No. 66 of 2023.

• In-kind benefits or advantages received or earned by employees are considered compensation or remuneration related to employment if such in-kind benefits or advantages:

a) Are determined as compensation or remuneration based on an employment agreement, employment contract, salary slip, or similar documents prepared by the employer as part of compensation or remuneration;

b) Are intended by the employer as an additional economic benefit in the form of bonuses, incentives, or similar.

• In-kind benefits or advantages received or earned by service providers are considered compensation or remuneration related to services if such in-kind benefits or advantages are determined as compensation or remuneration for services based on a cooperation agreement, invoice, receipt, or similar documents.

• Exemption limits for vehicle facilities provided by employers from being subject to Income Tax (PPh)

1. Vehicle facilities provided by employers are exempt from Income Tax if they are received or earned by employees who:

a) Do not have equity participation in the employer; and

b) Have an average gross income over the past 12 months of up to IDR 100,000,000 (one hundred million rupiahs) per month from the employer.

• The valuation of vehicle benefits for employees with utilization periods longer than one month is conducted monthly during the utilization period, including calculating the exemption limit as referred to in point 1.

• The phrase “employees who do not have equity participation in the employer” as referred to in point 1(a) includes employees who are not listed as having equity participation in the establishment deed, amendment deed, or similar documents made before or certified by a notary or other authorized official by applicable laws and regulations.

• Exemption limits for health and medical care facilities provided by employers from being subject to Income Tax (PPh)

Health and medical care facilities provided by employers that are exempt from Income Tax consist of:

1. Health and medical care facilities provided by employers based on a Location determination Decree for Certain Areas or its extension, provided that:
2. Received or earned by employees working in certain areas and/or their accompanying family members;
3. The health and medical care facilities are provided in:
4. Certain areas, for health and medical care facilities organized by:
5. The employer independently; or
6. Hospitals, clinics, and/or healthcare providers cooperating with the employer;
7. The regency or city area of a certain region or the regency or city area directly bordering the regency or city of that certain region, for health and medical treatment facilities organized by hospitals, clinics, or healthcare providers in cooperation with the employer.

• Health and medical care facilities provided by employers not based on a Location Determination Decree for Certain Areas or its extension, provided that:
  • Received or earned by employees; and
  • Provided for handling:
    • Work-related accidents;
    • Work-related illnesses;
    • Life-threatening emergencies; or
    • Continued treatment and care resulting from work-related accidents or illnesses.

• Exemption limits for education and/or training facilities provided by employers

1. Education and/or training facilities provided by employers that are exempt from Income Tax consist of:

a) Education and/or training facilities provided by employers based on a Location determination Decree for Certain Areas or its extension, provided that:

• Received or earned by employees working in certain areas and/or their accompanying family members; and
  • The education and/or training facilities are provided in:
    • Certain areas, for education and/or training facilities are organized by:
      • The employer independently; or
      • Educational and/or training institutions cooperating with the employer; and/or
    • The regency or city adjacent to certain areas, for education and/or training facilities organized by educational and/or training institutions cooperating with the employer.
  • Education and/or training facilities provided by employers not based on a Location Determination Decree for Certain Areas or its extension, provided that:
  • Received or earned by employees, excluding their families; and
  • Scholarships that meet specific requirements, such as scholarships received or earned by:
• Employees who are Indonesian citizens; and
• For attending formal and non-formal education conducted domestically and/or abroad.

• Scholarships provided by employers are not exempt from Income Tax if:
  • The employer (corporate taxpayer) has business, ownership, or control relationships with the employee receiving the scholarship;
    • The owner, commissioner, director, or manager of the employer has family relationships by blood or marriage in direct or collateral lines to the employee receiving the scholarship; or
    • The employer (individual taxpayer) has a business relationship with the employee receiving the scholarship.

• In-kind benefits in the form of price reductions (discounts)

In-kind benefits in the form of price reductions provided by employers are given through schemes such as:

1. Special discounts for employees on the purchase of goods produced and/or traded by the employer. The taxable income is the excess of the cost of goods sold after deducting the amount paid by the employee to the employer for purchasing the goods;
2. Special loans for employees at interest rates below publicly available loan rates. The taxable income is the excess of the interest cost incurred by the employer to obtain funds provided to the employee, after deducting the interest paid by the employee to the employer;

• Options for employees to purchase employer shares at a specific price and time in the future. The taxable income is the excess of:
  • The employer’s cost to acquire outstanding shares minus the price paid by the employee to exercise the share purchase option, in the case of shares sourced from share buybacks; or
  • The nominal value of the shares plus the share issuance cost minus the price paid by the employee to exercise the share purchase option, in the case of shares sourced from new share issuance.

• Nominative list of costs for compensation or remuneration related to employment or services in the form of in-kind benefits or advantages

1. Employers or providers of compensation or remuneration must report the costs of compensation or remuneration related to employment or services provided in the form of in-kind benefits or advantages along with the employees or recipients of compensation or remuneration in the Annual Income Tax Return by preparing a nominative list.
2. The nominative list of costs for compensation or remuneration as referred to in point 1 includes:

a) Costs of compensation or remuneration related to services provided in the form of in-kind benefits or advantages;

b) Costs of compensation or remuneration related to employment provided in the form of in-kind benefits or advantages.

• The costs of compensation or remuneration as referred to in points 2(a) and (b) are reported in detail for each type of in-kind benefit and/or advantage and each recipient.
• The nominative list as referred to in point 2 is prepared by the sample nominative list format as outlined in the appendix to this memo.

For tax service assistance, please contact:

            Rani Widianti

            T. (+6221) 2222-0200

            E. [email protected]

            Alvina Oktavia

            T. (+6221) 2222-0200

            E. [email protected]