Insight

The Indonesian government issued two significant regulations in the tax realm, namely Minister of Finance Regulation (PMK) Number 168 of 2023 and Government Regulation (PP) Number 58 of 2023. These two regulations bring important changes to Income Tax (PPh) 21 policy, especially regarding with employees. This article will discuss in depth the changes and impacts of PMK 168/2023 and PP 58/2023 on PPh 21 employees.

Latest PPh 21 Employee Regulations
The government has officially released the latest PPh 21 and/or PPh 26 regulations as instructions for withholding income tax. These guidelines are stated in Minister of Finance Regulation (PMK) Number 168 of 2023. This PMK replaces PMK Number 252 of 2008 which is also a derivative of Government Regulation (PP) Number 58 of 2023 concerning Income Tax Withholding Rates Article 21 on Income in Connection with Employment, Services or Activities of Individual Taxpayers.

Provisions for Implementing the New Income Tax Regulation Article 21
This latest regulation will apply to 3 types of employees, namely permanent employees, non-permanent employees and non-employees.

Income Tax Article 21 Permanent Employees
In Article 15 paragraphs (1) and (2) PMK 168/2023 states that the effective monthly rate is applied to calculate PPh Article 21 per period, while the rate of Article 17 PPh is used to calculate PPh Article 21 at the end of the last tax period. This provision also applies to retirees and employees who quit in the middle of the year.
Subjective tax obligations for new permanent employees will begin in January or before the end of December, when the calculation of PPh 21 payable is based on annualized net income. Tax is calculated proportionally to the number of months in the relevant part of the tax year.
The effective monthly rate is used for each tax period and the recalculation uses a progressive rate for the last tax period, namely the period when the employee stopped working, in this case resigning.