• Maulana Ibrahim & Gabriel Muara Thobias

What is Individual Income Tax?


Individual Income Tax is income tax that is imposed on Individual Taxpayers through certain provisions. There are several elements that should be highlighted when learning about Individual Income Tax, and those are the subjects, objects, classification, calculating the net income and taxable income, non-taxable incomes, rates, and also the payment and filing procedure of the Individual Income Tax.


Tax Subject


Tax subject is differentiated into domestic tax subject and foreign tax subject


Domestic Tax Subjects are individuals, including Indonesian and Foreigners that:

  1. Lives in Indonesia

  2. Is in Indonesia for more than 183 (one hundred and eighty-three) days in one calendar year (12 months)

  3. In Indonesia during a Fiscal Year and have plans to live in Indonesia


Foreign Tax Subjects are:

  1. Individuals currently not living in Indonesia

  2. Foreigners living in Indonesia for not more than 183 days in one calendar year (12 months)

  3. Indonesians living outside of Indonesia for more than 183 days in one calendar (12 months) and fulfills these criteria:

  4. Residence

  5. Main activities center

  6. Place of Practice

  7. Tax Subject’s Status; and/or,

  8. Additional criteria

these criteria will be regulated in the Laws from the Ministry of Finance


Not included as an Individual Tax Subject are:

  1. diplomatic and consular representatives or other officials from foreign countries and persons seconded to those who work for and reside with them on condition that they are not Indonesian citizens and do not receive or earn income outside of their position in Indonesia. or the work and the country concerned provide reciprocal treatment;

  2. representatives of international organizations, provided that they are not Indonesian citizens and do not carry out business, activities, or other work to earn income from Indonesia.


Tax Object


The tax object is income, which is an economical additional matter received or earned by the Taxpayers that came from either Indonesia or a foreign country, which can be used for consumption or to increase the Taxpayer’s assets, in any kind of name and form.


Exempted from the tax object provision is foreigners that has become domestic tax subject will be subjected to income tax on received or earned income from Indonesia, with the following provision:

  1. have certain abilities following the regulations and

  2. will be in action for 4 Fiscal Year, starting from the time the foreigners is considered as a regional tax subject

Included in the definition of an income are incomes received or earned from Indonesia in the form of occupations, services, or activities in Indonesia in any name or form that is paid outside of Indonesia. This provision does not apply to foreigners that is making use of the Persetujuan Penghindaran Pajak Berganda between the Indonesian government and the related country’s government or the jurisdiction of said regulation where the foreigner received the income from.


Excluded from being tax objects are:

  1. support or donations, as well as assets, donated;

  2. will;

  3. replacement or compensation in connection with work or services received or obtained in-kind and/or in-kind enjoyment and/or enjoyment with certain types and/or limitations;

  4. payments from insurance companies due to accident, illness, or death of the insured person, and scholarship insurance payments;

  5. dividends or other income with conditions;

  6. a share of profits or remaining operating results received or obtained by members of cooperatives, limited liability companies whose capital is not divided into shares, partnerships, associations, firms, and joint ventures, including holders of participation units in collective investment contracts;

  7. scholarships that meet certain requirements; and

  8. support or compensation paid by the Social Security Administering Body to certain Taxpayers;


Classification of Individual Income Tax Types


The imposition of Income Tax on an Individual’s Income can be classified into 3 categories:

  1. Income which is a Tax Object withholding Final Income Tax (Article 4(2))

  2. Income which is an object of non-final income tax (Article 4(1)) includes net income which is calculated using the norms

  3. Income that is not a Tax Object (Article 4 paragraph (3))


Calculation of Net Income


The method of calculating net income is to calculate all income received or earned in a fiscal year, except for income that is not an object of tax and income that has been subject to Final Income Tax.


If an individual taxpayer works, the net income can be seen in the withholding tax receipt (Form 1721) provided by the employer to the employee.


If an individual taxpayer conducts business and independent work, the net income earned in one year can be determined from the results of bookkeeping. For individual taxpayers whose income is more than IDR 4.8 billion, they are required to keep books of account based on applicable accounting standards. For individual taxpayers whose income is up to IDR 4.8 billion, they can choose to do bookkeeping. In addition, the individual taxpayer can calculate net income using the norm by previously notifying the letter of use of the norm to the registered KPP no later than 3 months after the end of the tax year.


Open this link to download the norm usage notice template


For individual MSME taxpayers who do business with an income of up to IDR 4.8 billion, the income is subject to MSME Final Income Tax. So that the said income is not combined with other net income.


See article on MSME Final Income Tax to learn more.


Non-Taxable Income


The amount of non-taxable income for individual taxpayers is as follows:


  1. IDR54,000,000.00 (fifty-four million rupiah) for an individual Taxpayer;

  2. IDR4,500,000.00 (four million five hundred thousand rupiahs) additional for married Taxpayers;

  3. IDR54,000,000.00 (fifty-four million rupiahs) additional for a wife whose income is combined with the husband's income as referred to in Article 8 paragraph (1); and

  4. IDR4,500,000,000.00 (four million five hundred thousand rupiahs) additional for each blood family member and family by marriage in a straight line and adopted children, who are fully dependent, for a maximum of 3 (three) people for each family.

The amount of non-taxable income is determined from the conditions at the beginning of the tax year or the beginning of the tax year portion.


Calculating Taxable Income


The method of calculating taxable income is that all net income is reduced by non-taxable income, zakat or obligatory religious contributions, and compensation for losses.


Tax Rate


Income tax rates for domestic individual taxpayers are as follows:


  1. Layers of Taxable Income up to IDR60,000,000.00 (sixty million rupiahs) are subject to a rate of 5% (five percent)

  2. Layers of Taxable Income above IDR50,000,000.00 (fifty million rupiahs) up to IDR250,000,000.00 (two hundred and fifty million rupiahs) are subject to a tariff of 15% (fifteen percent)

  3. Layers of Taxable Income above IDR250,000,000.00 (two hundred and fifty million rupiah) up to IDR500,000,000.00 (five hundred million rupiah) are subject to a rate of 25% (twenty-five percent)

  4. Layers of Taxable Income above IDR500,000,000.00 (five hundred million rupiahs) up to IDR5,000,000,000.00 (five billion rupiahs) are subject to a rate of 30% (thirty percent).

  5. Layers of Taxable Income above IDR5,000,000,000.00 (five billion rupiahs) are subject to a rate of 35% (thirty-five percent).


Calculating Individual Income Tax


How to calculate personal income tax is the taxable income multiplied by the tax rate above.


Illustration 1


Mr. A. Taxable income of IDR 340 million, how much is the personal income tax owed?


Income Tax Payable is:

5% x IDR60,000,000

= IDR3,000,000

15% x IDR190,000,000

= IDR28,500,000

25% x IDR90,000,000

= IDR22,500,000

+

Total

= IDR54,000,000

Calculating Underpaid/Overpaid Individual Income Tax


The method of calculating the underpaid/overpaid personal income tax is the personal income tax payable minus the tax credit. The following are tax credits that can reduce personal income tax:

  • Income Tax Article 21

  • Income Tax Article 22

  • Income Tax Article 24

  • Income Tax Article 25

If the personal income tax payable is greater than the tax credit, then there is an underpayment. Otherwise, there is an overpayment and a tax refund can be requested.



Individual Income Tax Payment Procedure


The deadline for payment/depositing of underpaid Individual Income Tax is before the annual Individual Income Tax Return is submitted, i.e. before March 31 of the following year.


Article 25 Income Tax installment payments by self-payment are carried out using a Tax Payment Letter (SSP) or other administrative means equivalent to an SSP no later than the 15 (fifteenth) of the following month after the end of the Tax Period by filling in the Tax Account Code 411125 and the Type of Deposit Code 100.



Individual Income Tax Filing Procedure


The deadline for submitting an Individual Taxpayer Income Tax Return is no later than 3 (three) months after the end of the Fiscal Year.


There are three types of Tax Payment Slip, namely:


The Annual Income Tax Return of Individual Taxpayers (Form 1770 and its Attachments) is for Taxpayers who have income:

  1. from independent business/work that maintains bookkeeping or Net Income Calculation Norms;

  2. from one or more employers;

  3. which is subject to Final and/or Final Income Tax; and/or

  4. other income


Simple Individual Taxpayer Income Tax Tax Payment Slip (Form 1770 S and its Attachments) is for Taxpayers who have income:

  1. from one or more employers;

  2. from other countries; and/or

  3. which is subject to final and/or final Income Tax.


Very Simple Annual Income Tax Return for Individual Taxpayers (Form 1770 SS) is for Taxpayers who have income from only one employer with a total gross income of not more than IDR60,000,000.00 (sixty million rupiah) a year and not have other income except income in the form of bank interest and/or cooperative interest. In the event that the Taxpayer submits the Annual Income Tax Return using Form 1770 SS, the Attachment of Evidence with Article 21 Withholding Tax in the form of Withholding Proof of 1721 A1 and/or 1721 A2 is an integral part of Form 1770 SS.


Individual Taxpayers can report their Tax Payment Slip online through the DGT website using the electronic Tax Payment Slip and E-Form. Please note that starting 28 February 2022, Individual Taxpayers can only use the E-Form.


The deadline for reporting Individual Income Tax Payment Slip is no later than 3 months after the end of the tax year.


The following is an E-Form usage tutorial for Payment Slip 1770 and Payment Slip 1770S


Illustration Example of Calculation of Individual Income Tax


First Illustration


Mrs. A is a private employee who is not married and has no dependents who earns a net income for 2022 of IDR125,400,000 in a year with Income Tax Article 21 which has been deducted by the employer of IDR4,710,000. How much Income Tax must be paid by Mrs. A and how is it reported?


The following is the calculation of income tax payable

Net Income IDR125,400,000

PTKP (TK/0) (IDR54,000,000)

Taxable Income IDR71,400,000


Income Tax Payable

=5% x IDR60,000,000

=IDR3,000,000

=15% x IDR11,400,000

=IDR1,710,000

Total Income Tax Payable

=IDR4,710,000

Income Tax Credit 21

=IDR4,710,000

Income Tax Accrued

=IDR0

Because the amount of income tax owed is the same as the amount of the tax credit, Mrs. A does not need to make the payment. However, Ms. A still has to report her Annual SPT. Because Mrs. A is someone who only has income from one employer, the type of Tax Return used is Tax Return 1770S which is reported no later than 3 months after the end of the tax year.


Second Illustration


Mr. A is a YouTuber who earns a gross income of IDR3,000,000,000 in a year in 2022 with single status and lives in Jakarta. In accordance with PER-17/PJ/2015, the NPPN rate for KLU art workers for the Jakarta area is 50%. How much Income Tax must be paid by Mr. A and how is it reported?


The following is the calculation of income tax payable

Gross Income IDR3,000,000,000

NPPN (50%) (IDR1,500,000,000)

Net Income IDR1,500,000,000

PTKP (TK/0) (IDR54,000,000)

Taxable Income IDR1,446,000,000


Income Tax Payable

=5% x IDR60.000.000

=IDR3.000.000

=15% x IDR190.000.000

=IDR28.500.000

=25% x IDR250.000.000

=IDR62.500.000

=30% x IDR946.000.000

=IDR283.800.000

Total Income Tax Payable

=IDR377.800.000

Article 25 Income Tax installment payments by self-payment are carried out using a Tax Payment Letter (SSP) or other administrative means equivalent to an SSP no later than the 15 (fifteenth) of the following month after the end of the Tax Period by filling in the Tax Account Code 411125 and the Payment Code 100.


Because Mr. A is someone who does free work that is subject to tax based on NPPN, the type of Tax Return used is Tax Returns 1770 which is reported no later than 3 months after the end of the tax year.


Third Illustration


Mr. B is a textile entrepreneur with married status and has 1 dependent. In 2022, Mr. B has a gross income from his business which is recorded using the bookkeeping method of IDR5,000,000,000. The cost of the business reached IDR2,500,000,000. How much Income Tax must be paid by Mr. B and how is it reported?


The following is the calculation of income tax payable

Business Gross Turnover IDR5,000,000,000

Fees (IDR2,500,000,000)

Net Income from Business IDR2,500,000,000

PTKP (K/1) (IDR63,000,000)

Taxable Income IDR2,437,000,000


Income Tax Payable

=5% x IDR60,000,000

=IDR3,000,000

=15% x IDR190,000,000

=IDR28,500,000

=25% x IDR250,000,000

=IDR62,500,000

=30% x IDR1,937,000,000

=IDR581,100,000

Total Income Tax Payable

=IDR6,751,100,000

Article 25 Income Tax installment payments by self-payment are carried out using a Tax Payment Slip (SSP) or other administrative means equivalent to an SSP no later than the 15 (fifteenth) of the following month after the end of the Tax Period by filling in the Tax Account Code 411125 and the Deposit Code 100.


Because Mr. B is an entrepreneur who keeps the books, the type of Tax Return used is Tax Return 1770, which is reported no later than 3 months after the end of the tax year.

 

Legal Basis:

  1. Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 7 Year 2021.

  2. Director-General of Taxes Number PER-34/PJ/2010 regarding Form of Annual Income Tax Return for Individual Taxpayers and Corporate Taxpayers along with Instructions for Filling in

 

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