In late 2023, the government introduced Peraturan Pemerintah (PP) 58/2023, marking a crucial update focused on simplifying the calculation of the effective rate for withholding PPh 21 or Income Tax Article 21. PPh 21 is a tax category applied to various forms of income, including salaries, wages, honoraria, allowances, and other payments received by employees.
This modification addresses the necessity for a more streamlined process, as the previous formula was considered excessively complex and susceptible to errors.
Key Changes in PPh21 Calculation
The core of the update centers around the implementation of the Tarif Efektif Rata-rata (TER) or average effective rate. TER serves as the percentage rate used to calculate PPh21 for each taxpayer, with variations based on their PTKP (non-taxable income) status and gross salary. So, under the new PP regulations, PPh21 is now calculated solely by multiplying the taxpayer’s gross income by their respective TER.
Shortly after this update, PMK 168/2023 was issued. This document serves as a detailed guide, explaining and clarifying how PP 58/2023 should be put into practice.
Concerning the new tax calculation, the next question is: how do I know my TER rate? Let’s delve deeper into it!
TER is categorized into two types: Monthly TER and Daily TER, determined by the taxpayer’s employment type.
Exploring Monthly TER
Monthly TER is applied to permanent or full-time employees receiving a monthly income. The system categorizes taxpayers into three groups based on their PTKP Status, which are listed below.
Moreover, the TER rate varies within each category depending on the taxpayer’s gross monthly salary. Here is a comprehensive list of the Monthly TER rates:
Exploring Daily TER
Daily TER, on the other hand, caters to freelancers with daily income. The TER rate in this category is categorized as follows:
Daily Worker Employee
In the case of income received on a non-daily basis, the gross income is the average of the daily income.
PMK 168/2023 explains more detailed calculations regarding the changes to the old regulation. It also includes sample calculations for a better understanding. In summary, the to-be tax calculation scheme for all employee types is reflected as follows:
In summary, the recent adjustments to Indonesia’s Income Tax (PPh21) Regulations signal a notable progression toward a more efficient and accurate tax calculation framework. The implementation of the Tarif Efektif Rata-rata (TER) underscores a commitment to simplifying processes and improving transparency.
These updates aim to not only facilitate the calculation of PPh21 but also contribute to the overarching goal of creating a clearer and more error-resistant tax environment. As taxpayers adapt to these changes, the emphasis on TER stands as a key element in achieving a streamlined and effective income tax system in Indonesia.
As taxpayers, it’s crucial for us to understand Indonesia’s changing tax rules. Amidst the constant changes and adjustments, maintaining awareness becomes especially vital, especially for business owners ensuring on-time and accurate salary payments to employees.
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