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  • Shaheila Roeswan, Ellicia Emerliawati, & Firyal Alvivah Safana

Tax Imposition on Freelancer and Freelance Work


Cover for article with the writing "Tax Imposition on Freelancer and Freelance Work"

Types of work are now more varied as it continues to shift away from the traditional full-time employment as we have known in the past. As a result, many types of income sources can be found in Indonesia. One of the most commonly found occupations in Indonesia is freelancer, freelancing, also known as being self-employed. Freelancers are those with jobs with no employment bound to a company. Based on data collected by Statista, in 2021 there are about 27,23 million freelancers in Indonesia. This number is surely an attention-grabber, especially remembering how Indonesia ranks fourth as the most populated country in the world, with around 275 million people in total.


In response to the many freelancers in Indonesia, the Indonesian government will surely try to impose and withhold tax from income received by these freelancers. However, this goal is proven to be rather difficult. Based on the data provided by the Directorate General of Taxes or DJP, in 2021 the compliance rate from Non-employee Individual Taxpayers only came from 1.85 million taxpayers, whereas in total, these types of taxpayers amount to 4.07 million.


The tax compliance rate from non-employee individual taxpayers itself is only 45.53%. One of the challenges faced by the DJP in implementing and increasing the compliance rate from these taxpayers is related to the Tax Returns (“SPT”) format which is used annually by non-employees. Taxpayers often find the format challenging, as it is rather difficult to simplify the format. This becomes more relatable as we must take into account that taxpayers will provide their own calculations for their annual tax returns.


In terms of tax regulations, following the Directorate General of Taxes Regulation Number PER-16/PJ/2016 regarding the Technical Guidelines for Withholding, Depositing and Reporting of Income Tax Article 21 and/or Income Tax Article 26 in Relation to Employment, Services and Activities of Individuals, freelancers are considered as a non-permanent employee or free labor. This means that the employee will only receive income if said employee is given work, based on the number of working days, the total number of work units produced, or based on the completion of a work given by the employer.


Hence, it becomes important for taxpayers to understand the types of taxes which can be imposed on freelancers. Taxpayers who work freelance can be imposed with Income Tax Article 21/26 on their freelance work. Freelance taxpayers should know that this is the tax that will be imposed on their income from freelance work.


Read more explanation on the imposition of Income Tax Article 21 and Income Tax Article 26 for freelancers.


Income Tax (“PPh”) Article 21


Taxpayers that are Indonesian citizen (“WNI”) or are domestic taxpayers (“WPDN”) is the subject of the imposition of Income Tax Article 21. The taxed object is the income received by taxpayers.


Below is the list of imposition provisions for Income Tax Art. 21 on Freelancers:

Tax Subject

The individual domestic taxpayer who receives income on a project basis; based on the number of working days, the total number of work units produced, or based on the completion of a work given by the employer.

Tax Object

Income received and/or obtained by individual domestic taxpayers, in the form of daily or weekly payment, unit or wholesale payment, or monthly-paid payment.

Tax Base

The tax base for the imposition of income tax art. 21 on Freelance is the total amount of income in the form of payment/daily payment or the average payment/daily payment which has exceeded IDR450,000 and/or the cumulative amount received and/or obtained in the same calendar month exceeding IDR4,500,000.

Exemption

For freelancers with a daily wage of no more that IDR450,000, then their income will not be withheld with Income Tax Art. 21

Tax Rate

The tax rate imposed is correlated with the amount of income received by the taxpayer each year. Below is the rate based on Article 17 of the Income Tax Law:

  • 5%: Income up to Rp60.000.000

  • 15%: Income above Rp60.000.000–Rp250.000.000

  • 25%: Income above Rp250.000.000–Rp500.000.000

  • 30%: Income above Rp500.000.000–Rp5.000.000.000

  • 35%: Income above Rp5.000.000.000

Income Tax Article 26


Taxpayers that are foreign citizens (“WNA”) or foreign taxpayers (“WPLN”) will be the subject of the imposition of Income Tax Art. 26. The taxed object is the income received by taxpayers.


What is considered as foreign taxpayer is a foreign citizen that lives within the Indonesian territory, for not more than 183 days in the span of 12 months.


Below is the list of imposition provisions for Income Tax Art. 26 on Freelancers:

Tax Subject

Foreign taxpayers who received and/or obtained income from within the Indonesian region, except for Permanent Establishment (“BUT”).

Tax Object

Income received by foreign taxpayers in the form of payment in relation with occupational services and activities.

Tax Base

The tax base for income tax art. 26 on Freelance is the gross income.

Tax Rate

The tax rate for income tax art. 26 imposed on individual foreign taxpayers is 20% or based on the Tax Treaty rate from where they received gross income.


Calculation Illustration


Income Tax Article 21

A single and domestic taxpayer works as a freelancer. They have received a gross income from a company with an amount of IDR200,000,000 in a year as payment for their service in graphic design. The freelancer also owns a Taxpayer Identification Number.


Taxable Income = Gross Income – Non-taxable Income (“PTKP”)

Taxable Income = IDR200,000,000 – IDR54,000,000 = IDR146,000,000


Then, the amount of income tax that is withheld for this freelancer is as follows:


Income Tax Art. 21 Due = Article 17 Rate x Taxable Income

= (5% x IDR60,000,000) + (15% x IDR86,000,000)

= IDR3,000,000 + IDR 12,900,000

= IDR15,900,000


Illustration 1

Daily income of a taxpayer does not exceed IDR450,000 and the cumulative amount received/obtained in the following monthly calendar does not exceed IDR4,500,000


Ratna is a freelance copywriter at PT MNZ, a multimedia company with a weekly contract where Ratna works for 4 hours per week, with a fee of IDR100,000/hour. Based on this rate, the income that Ratna received per day does not exceed IDR450,000 and does not exceed IDR4,500,000. Ratna’s income as a freelancer is not withheld with Income Tax Article 21.


Illustration 2

A taxpayer receives payment with terms of daily payment, weekly payment, unit payment, or wholesale payment exceeding IDR450,000/ However, the cumulative payment in the following month has not exceeded IDR4,500,000


Clara is a freelance editor with a fee of IDR450,000 paid daily. In a month, Clara works for 5 days, which means that in one calendar month, Clara has received and income of IDR2,250,000


Based on this data, the withheld income tax is as follows:

Taxable Income = Gross Income - PTKP

= IDR2,250,000 - IDR450,000

= IDR1,800,000

Income Tax Art.21 Due = 5% x IDR1,800,000

= IDR90,000


Illustration 3

A taxpayer receives payment with terms of the cumulative amount of daily payment, weekly payment, unit payment, and wholesale payment received or obtained in the following month has exceeded IDR4,500,000, but does not exceed IDR10,200,000.


Shayla is a freelance graphic designer with a daily fee of IDR550,000 per day. In one month, Shayla works for 10 days, which means that Shayla has received an income of IDR5,500,000 for one calendar month.


Based on this information, the withheld income tax calculation is illustrated below:


Taxable Income = Gross Income - PTKP

= IDR5,500,000 - (IDR450,000 x 10 days)

= IDR1,000,000

Income Tax Art.21 Due = 5% x IDR1,000,000

= IDR50,000


Illustration 4

A taxpayer receives payment with terms of the cumulative amount of daily payment, weekly payment, unit payment, and wholesale payment received or obtained in the following month has exceeded IDR10,200,000


Selvi (TK/0) is a freelance web designer working at an e-commerce company with a wholesale fee of IDR15,000,000 a month.


Based on this information, the withheld income tax calculation is illustrated below:


Taxable Income = Income Tax (Yearly) - Role Fee - Yearly Non-taxable Income

= (IDR15,000,000 x 12 months) - IDR6,000,000 - IDR54,000,000

= IDR180,000,000 - IDR6,000,000 - IDR54,000,000

= IDR120,000,000


Taxable Income (Yearly) = (5% x IDR60,000,000) + (15% x IDR60,000,000)

= IDR3,000,000 + IDR9,000,000

=IDR12,000,000

Income Tax Art.21 Due = IDR12,000,000/12

= IDR1,000,000


Income Tax Article 26

A foreign taxpayer works as a freelancer in Indonesia, and has received income given by an Indonesia-based company for their services. This freelancer receives a gross income of IDR200,000,000 in a year as payment for their services in video editing.


Based on this information, the withheld income tax calculation is illustrated below:


Taxable Income = IDR200,000,000


The details for their income tax withheld is as follows:


Income Tax Art. 26 Due = 20% x Taxable Income

= 20% x IDR200,000,000

=IDR40,000,000

 

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