Types of Income Tax in Indonesia – Income Tax (PPh) is a type of tax that plays the biggest role in a country’s source of income. Why? because taxes are obligatory contributions to the state owed by individuals or entities that are coercive by law, by not getting compensation directly and used for state needs, state financing and national development and people’s prosperity.
Even this income tax in Indonesia is imposed on individual and corporate taxpayers. The income that is imposed does not only come from salaries, but also from other sources such as operating profits, honoraria, prizes and other income in the calculation of one tax year.
Below is information about the types of income tax in Indonesia.
Definition of income tax
PPh is a tax imposed on individuals or entities on income received or accrued in a tax year.
Types of income tax in Indonesia
1. PPh (Income Tax) Article 15
Based on the Decree of the Minister of Finance No.417/KMK.04/1996 and Circular Letter of the Director General of Taxes Number SE-32/PJ.4/1996, it states that Article 15 Income Tax (PPh) is Income Tax (PPh) which is collected or imposed tax by using the special calculation norms of the taxpayer’s net income.
Income tax article 15 itself is a type of income tax that is imposed or collected from taxpayers engaged in the shipping industry, domestic and international flights and foreign insurance companies.
Other businesses that are also subject to PPh article 15 are oil drilling companies and companies that invest in the form of build-operate-transfers which are usually related to infrastructure projects. For example, the construction of toll roads, subways, and others.
2. PPh (Income Tax) Article 21
Income Tax Article 21 Is Withholding Income Paid To Individuals In Relation To Jobs, Positions, Services, And Activities.
3. PPh (Income Tax) Article 22
Income Tax or PPh Article 22 is the withholding/collection of income tax on the payment or delivery of goods or import activities and business in other fields or the sale of luxury goods.
4. PPh (Income Tax) Article 23
PPh Article 23 is a tax imposed on income on capital, service delivery, or gifts and awards, other than those that have been deducted from PPh Article 21. The party that deducts and reports PPh Article 23 to the tax office is the income provider (buyer or service recipient).
5. PPh (Income Tax) Article 25
PPh 25 is a tax payment on income which is paid in monthly installments with the aim of alleviating the burden on taxpayers who have difficulty paying off the tax payable within a span of one year.
6. PPh (Income Tax) Article 26
PPh Article 26 is income tax that is imposed on income received by foreign taxpayers other than permanent establishments (BUT) in Indonesia. This is included in the category of foreign taxpayers.
7. PPh (Income Tax) Article 29
Income Tax Article 29 is Underpaid Income Tax listed in the Annual Income Tax Return, namely the remaining income tax payable in the relevant tax year minus credit income tax and income tax article 25.
8. PPh (Income Tax) Article 4 paragraph (2)
Deductions on income paid in connection with certain services and certain sources (construction services, land/building leases, transfer of land/building rights, lottery prizes and others.
How much is the PPh rate in Indonesia?
1. PPh (Income Tax) Article 15
The amount of the Article 15 PPh rate that is imposed is not the same. Article 15 PPh rates vary depending on the type of business being run.
> For Article 15 PPh rates on domestic flight charters:
Income Tax payable = 30% x Net Income Calculation Norms.
The Norm for Calculation of Net Income = 6% x Gross Turnover.
Thus resulting in an effective rate for PPh payable = 1.8% x Gross Turnover (1.8% comes from 6% x 30%).
> Income Tax Article 15 on Domestic Shipping
PPh payable = 30% x Net Income Calculation Norms.
Net Income Calculation Norm = 4% x Gross Circulation.
So as to produce an effective rate for PPh payable = 30% x 4% x Gross Turnover = 1.2% x Gross Turnover and is final.
> PPh Article 15 on Overseas Shipping or Flights
Net income is set at 6% of gross circulation.
The amount of income tax for taxpayers is 2.64% of gross turnover and is final.
> Income Tax Article 15 for Foreign Trade Representative Offices in Indonesia
Net income = 1% of gross export value.
Income Tax Payable is set at 0.44% of the gross export value and is final.
For Trade Representative Offices (KPD) originating from P3B partner countries with Indonesia, the amount of tax rate payable will be adjusted to the rate of Branch Profit Tax (BPT) of a Permanent Establishment (BUT) in accordance with the relevant P3B.
> Income Tax Article 15 on Taxpayers Conducting International Maklon Service Business Activities in the Production of Children’s Toys
Net income is subject to 7% of the total cost of making or assembling goods, costs not included are costs for using raw materials. This applies as long as the Taxpayer does not enter into a Transfer Pricing Agreement with the DGT.
Income tax payable is 2.1% which is obtained from all costs of making or assembling goods, costs that are not included are costs for using raw materials.
2. PPh (Income Tax) Article 21
Tariff of article 17 of the Income Tax Law x the basis for the imposition of Income Tax (for income tax that is not final).
Final Rate x Gross Amount (for PPh is final).
The following is a layer of taxable income.
> Taxpayers with an annual income of IDR 0 – IDR 60,000,000/year are subject to a 5% rate.
> Taxpayers with an annual income of IDR 60,000,000 – IDR 250,000,000/year are subject to a 15% rate.
> Taxpayers with an annual income of IDR 250,000,000 – IDR 500,000,000/year are subject to a 25% rate.
> Taxpayers with an annual income of IDR 500,000,000 – IDR 5,000,000,000/year are subject to a 30% rate
> Taxpayers with an annual income of more than IDR 5,000,000,000/year are subject to a 35% rate.
3. PPh (Income Tax) Article 22
Article 22 Income Tax Rates
The amount of Article 22 Income Tax levy is determined as follows:
1. Upon import:
> Using Importer Identification Number (API) = 2.5% x import value;
> Non-API = 7.5% x import value;
> Those not controlled = 7.5% x auction sale price.
2. For purchases of goods made by DJPB, Government Treasurer, BUMN/BUMD = 1.5% x purchase price (excluding VAT and not final.)
3. The sale of production results is determined based on the Decree of the Director General of Taxes, i’e:
> Paper = 0.1% x DPP VAT (Not Final)
> Cement = 0.25% x DPP VAT (Not Final)
> Steel = 0.3% x DPP VAT (Not Final)
> Automotive = 0.45% x DPP VAT (Not Final)
4. On the sale of production results or delivery of goods by producers or importers of fuel oil, gas and lubricants are as follows:
> Collection of PPh Article 22 to dealers/agents, is final. Apart from the dealer/agent is not final.
5. For the purchase of materials for industrial or export needs from collectors, it is determined = 0.25% x purchase price (excluding VAT).
6. On imports of soybeans, wheat and wheat flour by importers using API = 0.5% x import value.
7. Top selling
> Private aircraft with a selling price of more than IDR 20,000,000,000
> Cruise ships and the like with a selling price of more than IDR 10,000,000,000
> Houses and land with a selling price or transfer price of more than IDR 10,000,000,000 and a building area of more than 500 m2.
> Apartments, condominiums and the like with a selling price or transfer of more than IDR 10,000,000,000 and/or a building area of more than 400 m2.
> Four-wheeled motorized vehicles for transporting less than 10 people in the form of sedans, jeeps, sport utility vehicles (Suv), multi-purpose vehicles (MPV), minibuses and the like with a selling price of more than IDR 5,000,000,000 (five billion rupiah) and with a cylinder capacity of more than 3,000 cc. 5% of the selling price excluding VAT and PPnBM.
Import value is the value in the form of money which is the basis for calculating Import Duty, namely Cost Insurance and Freight (CIF) plus Import Duty and other levies imposed based on the provisions of customs laws and regulations in the field of import.
The amount of the collection rate referred to above that is applied to taxpayers who do not have a Taxpayer Identification Number is 100% (one hundred percent) higher than the rate that is applied to taxpayers who can show a Taxpayer Identification Number. This provision applies to the collection of Income Tax Article 22 which is not final.
Excluded from Collection of Income Tax Article 22
- Import of goods and/or delivery of goods based on the provisions of laws and regulations are not subject to Income Tax;
- Import of goods that are exempt from Import Duty and/or Value Added Tax;
- Temporary import, if at the time of import it is clearly intended to be re-exported;
- Re-import, which includes goods that have been exported and then re-imported in the same quality or goods that have been exported for the purposes of repair, work and testing, which have met the conditions determined by the Directorate General of Customs and Excise;
- Payments made by tax collectors in respect of:
> payments made by tax collectors (Government Treasurer and Budget User Authority (KPA), spending treasurer, KPA or payment order issuing official delegated by Budget User Authority (KPA)), the maximum amount of which is IDR 2,000,000.00 ( two million rupiah) and is not a split payment;
> payments made by tax collectors (certain state-owned enterprises and state-owned banks) in a maximum amount of Rp. 10,000,000.00 (ten million rupiahs) and are not split payments;
> payment for: Purchase of fuel oil, gas fuel, lubricants, postal goods and Water and electricity consumption.
> Gold bars to be processed to produce jewelery made of gold for export purposes;
> Payment for the purchase of goods in connection with the use of School Operational Assistance (BOS) funds.
The exemption from the collection of Article 22 Income Tax on imported goods as referred to in point 2 above, remains in effect in the event that the imported goods are subject to an import duty rate of 0% (zero percent).
The exceptions referred to in points 1 and 6 are stated in the Statement of Income Tax Free Article 22 issued by the Director General of Taxes.
The exceptions referred to in points 4, 5 and 7 above are made without a Certificate of Exemption (SKB).
Provisions for the exemption from the imposition of Article 22 PPh on the import of goods that are exempt from import duty and/or VAT, on temporary imports are carried out by the Directorate General of Customs and Excise, the procedures for which are regulated by the Director General of Customs and Excise and/or the Director General of Taxes.
4. PPh (Income Tax) Article 23
The PPh Article 23 rate is imposed on the Tax Imposition Basis (DPP) or the gross amount of income. There are two types of rates imposed on income namely, 15 percent and 2 percent. These tariff provisions depend on the object of income tax article 23.
5. PPh (Income Tax) Article 25
The amount of Article 25 PPh installments in general:
net income multiplied by the tax rate, then divided by the twelve or the number of months in the tax year portion
In the case of individual taxpayers, net income is first deducted by non-taxable income before being multiplied by the tax rate.
Net Income is:
1. In the case of individual taxpayers who keep bookkeeping and from their bookkeeping it is possible to calculate the amount of net income every month, the net fiscal income is calculated based on the bookkeeping;
2. In the event that an individual taxpayer only keeps records using the Net Income Calculation Norms or keeps bookkeeping but from the books it cannot be calculated the amount of net income each month, net fiscal income is calculated based on the Net Income Calculation Norms on gross circulation or income.
3. In the case of corporate taxpayers, net fiscal income is calculated from the calculation of gross income minus costs for obtaining, collecting and maintaining income.
The amount of PPh Article 25 installments for newly registered individual taxpayers and newly registered corporate taxpayers who are not the result of a merger/liquidity/change in the form of a business entity from a previously existing corporate taxpayer is nil.
PPh Article 25 must be paid no later than the 15th (fifteenth) of the following month after the Tax Period ends. Taxpayers who make PPh Article 25 payments and have received validation with the state revenue transaction number are deemed to have submitted Periodic SPT PPh Article 25 according to the validation date.
6. PPh (Income Tax) Article 26
Article 23/26 PPh rates are imposed on the Basic Value of Tax Imposition (DPP) or the gross amount of income, regulated in Income Tax Law No. 7 of 1983 s.t.d.t.d Law no. 36/2008 s.t.d.t.d Law no. 11/2020 concerning Job Creation s.t.d.t.d Law no. 7/2021 regarding HPP.
UU no. 11/2020 itself as last amended by Government Regulation in Lieu of Law (Perppu) No. 2 of 2022 concerning Job Creation.
The general rate of income tax article 26 is 20%
However, if you follow a tax treaty or Double Tax Avoidance Agreement (P3B), then the rate may change, according to applicable regulations.
This is as regulated in Article 3 PP No. 9/2021, that interest income including premiums, discounts and rewards in connection with guarantees of debt repayments received or obtained by foreign taxpayers other than BUT is subject to withholding PPh 26 of 20% reduced to 10% or according to the rate based on the agreement on the avoidance of double taxation.
7. PPh (Income Tax) Article 29
Article 29 Income Tax Rates
1. Certain Entrepreneur Individual Taxpayers (WPOP-PT):
> PPh 25 that has been paid = 0.75 x total income / turnover per month.
> PPh 29 that must be paid = PPh that is still payable – PPh 25 that has been paid.
2. Corporate Taxpayer (WPB):
> 25 PPh installments = last year’s payable PPh x 12.
> PPh 29 that must be paid = PPh payable – PPh 25 installments.
8. PPh (Income Tax) Article 4 paragraph (2)
The imposition of Income Tax on interest from deposits and savings as well as discount on Bank Indonesia Certificates is as follows:
> Is subject to a final tax of 20% (twenty percent) of the gross amount, for domestic Taxpayers and permanent establishments.
> Is subject to a final tax of 20% (twenty percent) of the gross amount or at the rate based on the applicable Double Taxation Avoidance Agreement, for foreign Taxpayers.
for details can be seen on the following page.
https://djpb.kemenkeu.go.id/kppn/kotabumi/id/informasi/perpajakan/pph-pasal-4-ayat-2.html
Conclusion
Taxes are mandatory contributions to the state owed by individuals or entities that are coercive based on the law, by not getting compensation directly and used for the needs of the state for the greatest prosperity of the people.
Tax payment is a manifestation of state obligations and the participation of taxpayers to directly and jointly carry out tax obligations for state financing and national development.
As a taxpayer, it’s a good idea to know the types of taxes above to find out the amount of tax that must be paid through tax reporting.
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