I. Tax Rate and Its Application

1. Permanent Employees

a. Taxable income is calculated based on gross income less personal tax relief namely occupational expenses, contribution to approved pension fund including employee’s contribution to Jamsostek for Old Age Savings or Old Age Allowance (except for Civil Servants, members of Armed Forces and State Officials) and non taxable income.

b. Occupational expense is amount of 5% of gross income or maximum Rp 54.000/Month

or Rp 648.000/Year.

c. Non taxable income per annum.

2. A Pensioner who receives pension on monthly basis

a. Taxable income is calculated based on the gross income less pension expense and non taxable income.

b. The amount of pension expense is 5% of gross income or maximum Rp 18.000/month or Rp 216.000/year.

c. The amount of non taxable income for pensioner is the same as the permanent employee’s.

d. Tax rate used on taxable income of pensioner is the same as the permanent employee’s.

3. Casual Workers, Trainees and Apprentices

a. Taxable income is calculated based on gross income less non taxable income.

b. The amount of non taxable income for the above said employee is the same as the permanent employee’s.

c. Tax rate used on the taxable income of the above said employee is the same as the permanent employee’s.

4. The Recipients of the following income namely,

a. Honorarium, pocket money, prizes or rewards in whatever name and form, commission, scholarship, and other payments in whatever name as remuneration in respect of service or activities which the amount is not calculated based on the number of days needed to complete the above said service or activities performed.

b. Honorarium received or earned by members of board of commissioners or board of supervisor who is not a permanent employee of a company.

c. Production premium, gratuity, bonus and rewards received by retired employees

d. Withdrawal of funds from pension funds approved by Minister of Finance by participants of the pension program.

The Article 21 income tax is calculated based on gross income received or earned by the above said employees times tax rate which is the same as the permanent employee’s used.

5. An Expertise who carries out Independent Personal Services

a. Tax rate is 15% of the estimated net income which is paid or payable.

b. The estimated net income is 40% of gross income namely, honorarium or other remuneration in whatever name.

 

6. Recipients of Wages in form of daily wages, weekly wages, piece wages, contract wages and daily pocket money

The tax rate is 10% of such above said wages respectively which the amount is less than Rp 14.400/day and Rp 144.000/month respectively and or paid based on monthly scheme.

However, the ordinary amount of non taxable income divided by 360 days is as the relevant amount of non taxable income for tax relief if the amount of said wage is more than Rp 144.000/month.

a. the daily wage/pocket money shall be wage which is payable or paid based on number of working days;

b. the weekly wage shall be wage which is payable or paid based on weekly scheme;

c. the piece wage shall be wage which is payable or paid based on the quantity of units produced;

d. the contract wage shall be wage which is payable or paid based on the portion of work completed.

7. Recipients of severance payment, pension redemption payment, old age allowance or old age saving paid all directly is levied final tax as the followings:

10% of gross income which the amount is less than Rp 25 Million

15% of gross income which amount is more than Rp 25 Million

Exemption for the amount of the above said gross income is less than Rp 5.184.000

8. Recipients of prizes and rewards in whatever name and form

Income source from prizes or rewards is levied Article 21 income tax with the final rate of 15% of gross amount.

9. Part time runners of insurance companies and merchandise vendors who receive commission

Commission received by the said part time employees is subject to withholding tax with a rate of 10% final of the gross amount.

1. Monthly income received by permanent employees

Examples:

Iwan (married with 4 dependents known as m/4) working for PT Bima earns monthly salary with the amount of Rp 650.000. PT Bima participates on the Worker’s Social Security Program (Jamsostek) and pays the monthly insurance premium of the occupational accident security and death security with the amount of Rp 20.000 and Rp 5.000 respectively.

The monthly contributions for old age allowance is borne by the above said company with the amount of Rp 10.000 and Iwan himself pays for the above monthly old age allowance with the amount of Rp 6.500. Besides, the company participates on the pension program for its employees. The company pays the monthly contributions for pension to the approved pension funds with the amount of Rp 40.000 and Iwan himself pays the above said contributions with the amount of Rp 25.000.

The calculation of Article 21 Income Tax

Monthly salary Rp 650.000

Contributions for occupational

accident security Rp 20.000

Contributions for death security Rp 5.000

Gross Income/year Rp 675.000

Deductions

1. The Occupational expense

5% x Rp 675.000 Rp 33.750

2. Contributions for pension Rp 25.000

3. Contributions for old age

allowance Rp 6.500

(Rp 65.250)

Net Income/month Rp 609.750

Net Income/year 12 x Rp 609.750 Rp 7.317.000

Non Taxable Income:

for the taxpayer Rp 1.728.000

for spouse Rp 864.000

for dependents (Max.3) Rp 2.592.000 (Rp 5.184.000)

Taxable Income/year Rp 2.133.000

Article 21Income Tax /year

10% x Rp 2.133.000 Rp 213.300

Article 21Income Tax/month

Rp 213.300 Rp 17.775

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2. For a permanent employee who earns bonus, gratuity, rewards, holiday allowance or new year allowance, premium and other types of irregular income paid once a year.

Examples:

Referring to the preceding examples, Iwan also received bonus with the amount of Rp 5 Million in that year.

The calculation of Article 21 income tax on salary and bonus

Gross income Rp 8.100.000

12 x Rp 675.000

Bonus Rp 5.000.000

Total Gross Income/year Rp 13.100.000

Deductions

The occupational expense Rp 648.000

(Maximum)

5% x Rp 13.100.000 = Rp 655.000

Contributions of pension Rp 300.000

Contributions for

old age allowance Rp 78.000

(Rp 1.026.000)

Net Income/year Rp 12.074.000

Non Taxable Income (m/3) (Rp 5.184.000)

Taxable Income/year Rp 6.890.000

Article 21Income Tax on salary and bonus

10% x Rp 6.890.000 Rp 689.000

Article 21 Income tax on Bonus:

Article 21 Income tax on salary and bonus Rp 689.000

Article 21 Income tax on salary (Rp 213.300)

Article 21 Income tax on bonus Rp 471.700

3. A Pensioner who receives pension on the monthly basis

Examples:

Teja (m/2) retired from PT Mulia in 1994. Teja earns monthly pension with the amount of Rp 2.000.000 during the year of 1995.

The calculation of Article 21Income tax

Pension/month Rp 2.000.000

Deductions:

Pension expense

5% x Rp 2.000.000= Rp 100.000

Maximum (Rp 18.000)

Net Income/month Rp 1.982.000

Net Income/year Rp 23.784.000

(12 x Rp 1.982.000)

Non Taxable Income (m/2) (Rp 4.320.000)

Taxable Income Rp 19.464.000

Article 21Income Tax /year Rp 1.946.400

10% x Rp 19.464.000

Article 21Income tax /month Rp 162.200

Rp 1.946.400

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4. Casual Workers who receives income on monthly basis

Examples:

Wahyu (m/0) works for the textile industry and receives daily wage paid based on the monthly scheme. During January 1995, Wahyu works for 20 days and his daily wage is Rp 18.000.

Calculation of Income tax Article 21

Wage on January Rp 360.000

20 x Rp 18.000

Net Income/year Rp 4.320.000

12 x Rp 360.000

Non Taxable Income (Rp 2.592.000)

Taxable Income/year Rp 1.728.000

Article 21Income Tax /year Rp 172.800

Article 21Income Tax /month Rp 14.400

Rp 172.800

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5. Recipients of honorarium or other payment

Examples:

Ali who is speaker in a daily workshop held by a foundation received honorarium of Rp 1 Million.

Calculation of Article 21 Income Tax withheld (pursuant to the rate of Article 17)

10% x Rp 1.000.000 = Rp 100.000

Honorarium or other payments received by Civil Servants, members of Armed Force and state officers which are borne by the state/local budget is levied tax regulated under Government Regulation Number 45 Year 1994 (see leaflet Income Tax Series Number -03).

6. Honorarium received by an expertise in respect of independent personal services

Examples:

Gatot who is an architect received honorarium of Rp 20 Million form PT Abang in respect of rendering of technical services in March 1995.

Calculation of Article 21Income tax

15% x 40% x Rp 20.000.000 = Rp 1.200.000

Examples:

Haryono (not married and no dependents as nm/0) works for PT Sharpen and receives wage which the amount of Rp 20.000/day.

Calculation of Article 21Income tax :

Daily wage Rp 20.000

Taxable wage: Rp 20.000-Rp 14.400 Rp 5.600

Article 21Income Tax : 10% x Rp 5.600 Rp 560

8. Income in form of severance payment, pension redemption payment, old age allowance or old age saving paid by the Pension Funds approved by Minister of Finance.

Examples:

Eko received pension redemption payment which is the amount of Rp 75 Million from the approved Pension Funds.

The calculation of Article 21 Income tax which is final withheld on pension redemption payment is as follows:

15% x Rp 75.000.00 = Rp 11.250.000

9. Ali who is a tennis player and resides in Indonesia is the winner of a tournament held by the tournament organizer. As his participation on the tournament, he received reward with the amount of Rp 10 Million and the above said reward is subject to the final withholding tax of Article 21 which is withheld by the said organizer. The calculation of the Article 21 Income tax is as follows:

15% x Rp 10.000.000= Rp 1.500.000.

10. Part-time Runners of Insurance Companies or Merchandise Vendors who receive commission

Tri who is a merchandise vendor working for PT Jaya received commission which the amount of Rp 750.000 in January 1996.

The calculation of the final Article 21income tax is as follows:

10% x Rp 750.000 = Rp 75.000.