Every monthly income received by private employees will be taxed. The tax obligation on this income is known as Income Tax (PPh). For private employees, income tax is paid monthly by the company which is deducted directly from income. Then, the company that deducts taxes from the employee’s salary will pay or deposit it into the state treasury every month. As for private employees who have side businesses and other investments, they can report annually when submitting the Annual Tax Return (SPT). Annual SPT reporting is important to do before passing the deadline that has been set. The deadline for annual SPT reporting is March 31, 2023 for individual taxpayers and April 30, 2023 for corporate taxpayers. So, how much private employee tax is deducted by the company or reported independently in the Annual Tax Return? How to calculate it? Check out the following review.
What is Income Tax?
Before knowing more about the amount of private employee tax and how to calculate it, KH Friend needs to first understand what Income Tax (PPh) is. Income tax is a tax imposed on an income obtained by a taxpayer, both from Indonesia and from abroad. For private employees from Indonesia, the type of income tax used is ITA 21. Where ITA 21 is tax withholding on income in connection with work, services, or activities by any name or form received or obtained by domestic individual taxpayers. In Law (UU) No. 36 of 2008, it is stated that what is subject to Income Tax is all forms of income, including wages, salaries, allowances, honoraria, or other payments related to services, activities, positions, or jobs.
Who are Private Employees Subject to Income Tax?
The following are participants who must do the taxpayer ITA 21 according to the Director General of Taxes Regulation No. PER-32 / PJ / 2015 / Article 3: 1. Employees 2. Recipients of severance pay, pensions or retirement benefits, old-age allowances, or old-age guarantees, including their heirs 3. Non-employees who receive or obtain income in connection with the provision of services, including:
- Experts who perform independent work, consisting of lawyers, accountants, architects, doctors, consultants, notaries, assessors, and actuaries;
- Musical performers, hosts, singers, comedians, movie stars, soap opera stars, advertising stars, directors, film crew, photo models, beauticians, dramatists, dancers, sculptors, painters, and other artists;
- Sportsman;
- Advisor, teacher, trainer, lecturer, counselor, and moderator;
- Author, researcher, and translator;
- Providing services in all fields including engineering, computers and their application systems, telecommunications, electronics, photography, economics, and social services and providing services to a committee;
- Advertising agency;
- Project supervisor or manager;
- Order bearers or those who find subscriptions or who intercede;
- Hawkers selling merchandise;
- Officers outside of insurance; and
- Distributor of multilevel marketing or direct selling companies and other similar activities.
4. Members of the board of commissioners or supervisory board who do not concurrently serve as permanent employees of the same company 5. Former employees; and 6. Activity participants who receive or obtain income in connection with their participation in an activity, among others:
- Participants in competitions in all fields, including sports, arts, agility, science, technology and other competitions;
- Participants of a meeting, conference, session, assembly, or working visit;
- Participants or members in a committee as organizers of certain activities;
- Education and training participants; or
- Other activity participants.
Components of Private Employee Tax Calculation
In the provisions of income tax or PPh 21, there are components and important things that need to be considered. The components in ITA 21 are different from the components in other types of taxes, including the following:
Gross Income
Gross income or gross income is the type of income that is subject to Income Tax 21 withholding. The elements that increase income included in gross income are:
- Regular income (salary and allowances)
- Irregular income (bonus, THR, overtime pay)
- BPJS contributions or insurance premiums paid by the company
- Work accident insurance
- Death benefit
- Health insurance/BPJS Health
- Income tax allowance 21 paid by the company (if any)
Gross Income Deduction
Gross income deductions are expenses that can reduce gross income. Included in the deduction are:
- Position expenses (5% of gross annual income and a maximum of Rp500 thousand a month or Rp6 million a year)
- Pension costs (5% of gross annual income and a maximum of IDR 200,000 a month or IDR 2.4 million a year)
- BPJS contributions, old-age insurance, health insurance, and pension insurance paid by employees
Non-taxable income (PTKP)
After you know your net income, the next component you need to know is PTKP. PTKP is the amount of income that is not subject to income tax, so taxpayers whose income is at PTKP or below the PTKP limit do not need to pay income tax. The following is the PTKP rate:
- IDR 54 million for individual taxpayers
- IDR4.5 million additional for married taxpayers
- IDR 54 million for a wife whose income is combined with her husband’s income
- An additional Rp4.5 million for each member of the blood family in a straight line of descent and adopted children who are fully dependent, with a maximum of three people for each family.
Income Tax Rates for Private Employees
Based on Law No. 7 of 2021 concerning Harmonization of Tax Regulations (HPP), the personal income tax rate for private employees is calculated using progressive rates as follows:
- Taxpayers with annual income up to IDR60 million is 5 percent
- Taxpayers with annual income above IDR60 million up to IDR250 million is 15 percent
- Taxpayers with annual income above IDR250 million up to IDR500 million is 25%.
- Taxpayers with annual income above IDR 500 million is 30%.
- For taxpayers who do not have an NPWP, the rate is 20% higher than those who have an NPWP.
Example of Calculation of Income Tax for Private Employees
As already explained, the calculation of income tax for private employees can be divided into two. The first is the income tax paid monthly by the company deducted from income, then there is also income tax that is reported independently on the annual tax return for employees who have a side business or investment.
Private Employee Fixed Income
Andi is an unmarried private employee working at PT ABC, earning a monthly salary of Rp8 million. The company participates in the BPJS Employment program, the work accident insurance premium and death insurance premium are paid by the company in the amount of 0.5 percent and 0.3 percent of salary respectively. PT ABC also pays old-age insurance contributions every month amounting to 3.7 percent of salary, while Andi pays old-age insurance contributions amounting to 2 percent of salary every month. In addition, the company also participates in a pension program for its employees. PT ABC pays Andi’s pension to the pension fund every month amounting to Rp200,000, while Andi pays a pension of Rp100,000.
- Gross Income = Salary + Work accident premium + death premium
Gross Income = Rp8,064,000
- Deduction = 5 percent position fee + pension contribution + old-age insurance contribution
Deduction = IDR763,200
- Net Income in a Month = Gross Income – Deduction
Net Monthly Income = Rp7,300,800
Net Income for the Year = Rp87,609,600
- PTKP Individual taxpayer = IDR 54 million
- PKP Yearly = Net Income Yearly – PTKP
PKP for one year = Rp33,609,600
- Income tax for the year = 5% x IDR 33,609,600 = IDR 1,680,480
Therefore, the monthly PPh 21 imposed on Andi’s income is Rp140,040.
Private Employee with a Side Business
Desy is a private employee at PT XYZ and is unmarried. Desy’s basic salary and benefits are Rp7 million per month. She receives an annual bonus of one time salary of Rp7 million and THR for Lebaran of Rp7 million. Health BPJS contributions every month are IDR 100 thousand, as well as BPJS Employment contributions of IDR 120 thousand and pension insurance of IDR 78 thousand. Then, Desy also has a side business, namely selling online with a turnover of IDR 5 million per month, and investing in stocks with a profit of IDR 50 million per year.
- Gross Income for a Year = Base salary and benefits for a year + One-time annual bonus + Eid al-Fitr allowance
Gross Income in a Year = Rp98 million
- Deduction = BPJS Health + BPJS Employment + Pension insurance dues
Monthly deduction = IDR 298 thousand
One year deduction = Rp3,576,000
- Net Income for a Year = Gross income for a year – deduction for a year
Net Income for the Year = Rp94,424,000
- PTKP Individual taxpayer = IDR 54 million
- PKP Yearly = Net Income Yearly – PTKP
One year PKP from salary = Rp40,424,000 One year PKP from playing shares = Rp50 million One year turnover of online business = Rp60 million (not taxed because MSME has not reached Rp500 million)
Total PKP = Rp90,424,000
- Income tax 21 a year
5 percent x Rp60 million = Rp3 million 15 percent x Rp30,424,000 = Rp4,563,600 Thus, the total income tax that Desy must pay annually is Rp7,563,000.
Common Mistakes in Private Employee Tax Calculation
Undeniably, the calculation of income tax is a bit confusing. Especially if KH Friend makes basic mistakes in calculating it which makes this thing look even more complicated. Thus, it is important for KH Pals to avoid mistakes when calculating income tax. Here are some mistakes that are often made when calculating income tax for private employees:
Forgot to Include Position Costs
Occupational expenses are common for private/national/civil servants. Position cost is the cost of earning, collecting, and maintaining income. Position expenses are an important element in calculating income tax for private employees. The amount is 5 percent of gross income. If not included, the calculation results can be incorrect.
Not Calculating as Stipulated
Here it is important for KH Friend to know the latest guidelines regarding the amount of tax rates applied. If not, there will automatically be a calculation error because it does not follow the provisions as it should.
Choosing the Wrong PTKP
The term PTKP may still be rarely heard by taxpayers. Some of them are still confused in understanding PTKP.
READ ALSO: Why Reporting Annual Tax Return is Important?
Well, if KH Friend is wrong in filling out the form or calculating PTKP, it will also have an impact on the results of the income tax calculation.
KH Contact
Calculation of income tax including private employee tax is very important so that your payment obligations are correct. Conversely, if KH Friend makes a mistake in calculating taxes or pays late, you could be subject to administrative sanctions or fines to criminal sanctions. Now if KH Friend does not want to report to fulfill the needs of periodic and annual SPT reports, you can immediately contact Kontrak Hukum. Through the annual SPT and monthly SPT services available, of course it is more efficient and easier for KH Pals to not have to bother taking care of taxation, as well as avoiding errors in calculations. For more information, please visit KH’s service page – tax. If you have further questions regarding taxation or other business needs, do not hesitate to consult with us at Tanya KH or via Direct Message (DM) to Instagram @kontrakhukum.
