Effective Employees Witholding Tax Rate

This regulation aims to simplify and ease the compliance of tax obligations for taxpayers regarding the withholding of Income Tax Article 21 (PPh 21), as well as to adjust the income tax rates for domestic individual taxpayers, following the enactment of Law Number 7 of 2021 on Tax Regulation Harmonization.

This regulation specifies the effective withholding rates for PPh 21 for individual taxpayers who earn income related to employment, services, or activities, including state officials, civil servants, members of the Indonesian National Armed Forces, members of the Indonesian National Police, and their pensioners. It comprises:

1. Monthly effective rates
2. Daily effective rates

The monthly effective rates are categorized based on the amount of Non-Taxable Income (PTKP) according to the marital status and the number of dependents of the taxpayer at the beginning of the tax year.

There are 3 categories of monthly effective rates:

1. Category A is applied to the gross monthly income received or earned by income recipients with the following PTKP status:
   1. Single without dependents (TK/0)
   2. Single with 1 dependent (TK/1)
   3. Married without dependents (K/0)
2. Category B is applied to the gross monthly income received or earned by income recipients with the following PTKP status:
   1. Single with 2 dependents (TK/2)
   2. Single with 3 dependents (TK/3)
   3. Married with 1 dependent (K/1)
   4. Married with 2 dependents (K/2)
3. Category C is applied to the gross monthly income received or earned by income recipients with the following PTKP status: Married with 3 dependents (K/3)

The application of the monthly effective rates for Permanent Employees is only used for calculating PPh 21 for tax periods other than the Last Tax Period, whereas the calculation of PPh 21 for a year in the Last Tax Period continues to use the rates specified in Article 17 paragraph (1) letter a of the Income Tax Law, as per current regulations.

This Government Regulation takes effect starting January 1, 2024.

MONTHLY EFFECTIVE RATE CATEGORIES

1. Monthly Effective Rate for Category A
2. Monthly Effective Rate for Category B
3. Monthly Effective Rate for Category C

DAILY EFFECTIVE RATE CATEGORIES

For companies, the withholding of employee income tax must apply the average effective rates according to the table above. The calculation scheme of PPh 21 using the average effective rates will not result in a different tax burden for employees. The application of the effective PPh 21 rates for permanent employees is only used in calculating PPh 21 for the tax periods January-November by simply multiplying the gross monthly income by the monthly effective rate. Subsequently, the calculation in December will be the same as before or will continue to use the rates specified in Article 17 letter a of the Income Tax Law.

Companies must be more precise in calculating the PPh 21 deduction with effective rates to avoid underpayment or overpayment that is too significant. Meanwhile, employees should understand if the tax deducted from January to November appears small, but in December it spikes higher or vice versa.