Income Tax (PPh) Article 21: Meaning, How to Calculate and Examples of Application

Income Tax Article 21, or better known as PPh Article 21, is a tax imposed on income in the form of salaries, wages, honorariums, allowances, etc. received or obtained by individuals from employment or employment. 

Understanding PPh 21

Income Tax (PPh) Article 21 is a tax imposed on income in the form of salaries, wages, honorarium, allowances and other similar payments received or obtained by domestic individual taxpayers from work, services and activities carried out by employers. .

Subjects of this tax include Indonesian citizens (WNI) who earn income, foreign citizens (WNA) who work and live in Indonesia, as well as officials or employees from representatives of foreign countries and international institutions residing in Indonesia, including their family members.

The following is a further explanation:

Tax Imposition Basis (DPP):

Salaries, wages, allowances, bonuses, gratuities, pensions and other forms of payment. Position fees and pension costs can be deducted from gross income to obtain DPP.

How to Calculate PPh 21

In calculating PPh Article 21, first determine the total gross income received in a year. From this amount, deduct certain costs such as position fees, which have a maximum of 5% of gross income and cannot exceed IDR 6.000.000 per year, as well as pension costs if any. 

After getting the amount to be taxed, apply progressive tax rates. 

The rate is 5% for income up to IDR 50.000.000, 15% for income between IDR 50.000.001 to IDR 250.000.000, 25% for income between IDR 250.000.001 to IDR 500.000.000, and 30% for income above IDR 500.000.000.

Calculate the total gross income in a year.

Deduct position costs (maximum 5% of gross income and maximum IDR 6.000.000 a year) and pension costs (if any).

Applicable tax rates:

IDR 0 - IDR 50.000.000: 5%

IDR 50.000.001 - IDR 250.000.000: 15%

IDR 250.000.001 - IDR 500.000.000: 25%

IDR 500.000.000: 30%

Calculate the tax owed based on the applicable rates.

Application:

Usually, this tax is deducted by the employer every month and reported and deposited into the state treasury.

Example of a simple PPh 21 formula

For example, someone receives a salary of IDR 200.000.000 a year.

Position fee: 5% x IDR 200.000.000 = IDR 10.000.000 (less than IDR 6.000.000).

Tax Imposition Basis (DPP) = IDR 200.000.000 - IDR 10.000.000 = IDR 190.000.000.

Calculate the tax owed:

5% x IDR 50.000.000 = IDR 2.500.000.

15% x (IDR 190.000.000 - IDR 50.000.000) = IDR 21.000.000.

Total tax payable: IDR 2.500.000 + IDR 21.000.000 = IDR 23.500.000.

Income Tax (PPh) Article 21 is a tax imposed on the salary or wages a person receives from their work.

Suppose you have a total salary of IDR 200 million a year.

You can cut position costs, for example IDR 10 million.

So the basis for calculating your tax is IDR 190 million.

Of that IDR 190 million, you pay 5% tax for the first IDR 50 million, then 15% for the remainder.

The total tax you have to pay is approximately IDR 23,5 million.

It is important to note that the above calculation is a simple example. In practice, the calculation of Income Tax Article 21 can be more complex depending on the various components of income and deductions received by the taxpayer. 

It is always recommended to consult a tax expert or use accounting software to help with more accurate calculations.

Who Pays? Usually, it is the company you work for that deducts this tax from your paycheck every month and pays it for you.

Hopefully this explanation is more concise and easy to understand!

The withholding of PPh Article 21 is usually carried out by the employer when paying salaries or wages. After withholding tax, employers have the obligation to report and deposit it into the state treasury. 

Apart from that, employers must also submit Periodic Income Tax Returns Article 21 every month and Annual Income Tax Returns Article 21. It is important to note that income recipients who have a NPWP will receive a lower income tax deduction. 

There are also several types of income that are granted exemption or reduction from Income Tax Article 21, such as salaries of foreigners who work for foreign governments in Indonesia and certain types of allowances. For those dealing with special situations or requiring further assistance, it is recommended to consult a tax expert.

There are several types of income that receive exemption or reduction from PPh Article 21, such as salaries of foreigners who work for foreign governments in Indonesia, and certain types of allowances.

This is a general overview, and of course there are technical terms and other details you may need to consider depending on your particular situation. If you plan to perform calculations or have a special situation, it is recommended to consult a tax professional or accountant.