Tax Credit
A Tax Credit is tax previously paid or withheld/collected that can be offset (credited) against total tax liability at year-end. Governed by Article 28 of Law No. 36/2008 on Income Tax (UU PPh). Tax credits available to individual taxpayers include: 1. PPh 21: Withheld by employer from salary (Form 1721-A1), 2. PPh 22: Tax on purchases of certain goods or imports, 3. PPh 23: Tax on services received or interest income, 4. PPh 25: Monthly income tax installments paid by the taxpayer, 5. PPh 26: Tax (PPh 24) on foreign-source income. If total tax credits exceed the year's tax liability, the excess may be: (1) Refunded (restitusi) to the taxpayer's bank account, (2) Carried forward (compensated) to the next tax year, (3) Applied to other tax debts (Article 17C, UU KUP).
This article is for education, not tax advice.
Example
Rina has annual income of Rp 80 million with tax liability of Rp 5 million. Her tax credits consist of: PPh 21 withheld (Form 1721-A1) Rp 3.6 million + PPh 25 installments over 12 months Rp 1.2 million + PPh 22 on purchases Rp 300,000 = Total credits Rp 5.1 million. Since credits of Rp 5.1 million exceed her tax liability of Rp 5 million, Rina is entitled to a refund of Rp 100,000 or may carry it forward to next year.
Source: Article 28 UU PPh (Law No. 36/2008); Article 17C UU KUP (Law No. 28/2007)