I. DEFINITION

1. Article 21 Income Tax

Article 21 Income Tax is tax on income in form of salaries, wages, honorarium, allowances, and other payment in what ever name received or earned by individual resident tax payer in relation with work, services and activities.

2. Withholding Agent of Article 21 Income Tax

a. Employers namely, individuals and companies including permanent establishment, either head office or branch, representative or unit, who pay salaries, wages, honorarium, allowances and other payments in what ever name, as compensation in respect of works or services carried out by employees or other than employee.

b. Government treasurers including state or local government treasurers, government institutions or bodies, other government bodies and Indonesia Embassies in overseas that pay salaries, wages, honorarium, allowances and other payment in what ever name in connection with works, services or activities.

c. Pension funds such as PT.Taspen, PT.Astek, and other bodies which engage Jamsostek, and other Pension Funds that pay pension, old age saving or old age allowances.

d. Companies, legal bodies including permanent establishment that pay honorarium or other payment as compensation in relation with activities and services, including services by an expertise who is a resident taxpayer who carries out independent personal services.

e. Foundation (including foundation in welfare, hospital, education, art, sport, and culture), institutions, committees, association, club, and organisation in form of all activities as payer of salaries, wages, honorarium or compensation in whatever name in relation with work, service and activity carried out by individual.

f. Companies, bodies including permanent establishment who pay honorarium or other compensation to the participants of education, training and apprenticeship.

3. Recipients of Income subject to Article 21 withholding Tax

a. Permanent Employees:

Individuals who work for employers received and earned salaries in the certain amount on regular basis, including members of board of commissioner and members of supervisory board who are day to day participate in managing the company activities directly.

b. Casual Workers

Individuals who work for employers received compensation if the said individuals work.

c. Pensioners

Individuals or heir/heiress who receive or earn compensation in consideration of past employment including individuals who receive old age saving and old age allowances.

d. Recipients of Honorarium

Individuals who receive or earn compensation in connection with work, services or activities.

e. Recipients of Wages

Individuals who receive daily wages, weekly wages, piece wages or contract wages.

4. Not regarded as Recipients of Income

a. Diplomatic and consulate officials or other officials from foreign countries and individuals who are placed to assist the said officials and stayed with them with the following conditions:

- not as Indonesia citizen and

- not receive or earn other income from outside their position in Indonesia.

b. Officials of representative offices of the International Organisation as stated in the Decree of Ministry of Finance Number: 611/KMK.04/1994 , on the date of December 23, 1994 with the following requirements namely, not Indonesian citizen and not doing other business or activities to earn income in Indonesia.

5. Income Withheld By Article 21 Income Tax:

a. Regular income received or earned such as salary, monthly pension payment, wages, honorarium (including honorarium of member of commissioner board or member of supervisory board), monthly premium, overtime pay, assistance pay, wife and child allowances, compensation, scholarship, prize, insurance premium paid by employer and other regular income in whatever name.

b. Irregular income received or earned such as production services, tantiem, gratuity, leave allowances, lebaran allowances, new year allowances, bonus, annual premium, and other irregular income paid one a year.

c. Daily wages, weekly wages, piece wages, contract wages.

d. Pension redemption payment, old age saving or old age allowances, severance payment and other similar kind of payment.

e. Honorarium, allowances, prizes or reward in what ever name and form, commission, scholarship, and other payment as compensation in connection with the work, services, and activities done by resident taxpayers including expertise, musician, master of ceremony, singer, comedian, actor/actress, sportsmen, consultant, teacher, trainer, lecturer, moderator, writer, researcher, technical service, advertising agent, supervisor, project manager, person running for order, participants of tournament, merchandise vendors, runners of insurance company, participants of education, training, and apprenticeship.

f. Recipients of fringe benefits in what ever name give by non tax payer.

6. Income which is not subject to Article 21 withholding Income Tax

a. insurance payment by insurance company in respect of health insurance, casualty insurance, life insurance, dual purpose insurance, and scholarship insurance;

b. payment in Fringe benefits in what ever name which are given by Government and taxpayers;

c. pension contributions paid by the employer to pension funds of which the establishments are endorsed by Minister of Finance and to organizers of Taspen (Civil Servants Insured Savings) or Old Age Saving or Old Age Allowance (THT) and to organizers of Jaminan Sosial Tenaga Kerja (Jamsostek = Manpower Social Insurance);

d. payment in kind and other benefits in whatever name, provided by the Government;

e. benefit in the form of tax borne by the employer.

 

 

II. OTHERS

1. The Tax Withholder of Article 21 Income Tax is required to provide the receipt of withholding of Income Tax Article 21 (KP.PPh.2.1/BP-95), whether requested or not, at the time of tax withholding, to individuals who are casual workers, recipients of pensions redemption payment, recipients of Old Age Allowance or Old Age Saving (THT), recipients of severance payment and recipients of pension fund with fixed contribution.

2. The Tax Withholder is required to provide the receipt of withholding of Article 21 Income Tax (form 1721-A1 atau 1721-A2) to permanent employees, including pensioners receiving the monthly pension, within 2 (two) months after the end of the calendar year.

3. If a permanent employee terminated work or retired in during the calendar year, the receipt of withholding (form 1721-A1 atau 1721-A2) shall be provided by the employer at the latest 1 month since the said employee terminated work or retired.

4. The recipients of income shall submit a statement letter to the Tax Withholder of Article 21 Income tax regarding to the number of family dependent at the beginning of the calendar year or when said person firstly becomes a resident taxpayer.

5. To fulfil the obligation of Article 21 Income Tax, the tax withholder of Article 21 income tax or employers use withholding tax guidance of article 21 Income Tax.

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