Article 21 Income Tax (PPh 21)
PPh Article 21 is the income tax on wages, salaries, honoraria, allowances, and other payments received by individual residents in connection with work, employment, services, or activities (Article 21 para. 1, Income Tax Law). Governed by Article 21 of Law No. 36/2008 on Income Tax (UU PPh) and Ministry of Finance Regulation No. 168/PMK.03/2023. Effective January 1, 2024, withholding uses the Effective Average Rate (TER) method, which is simpler than the previous progressive rate method. The withholding agent (usually the employer, treasurer, or payment maker) is obligated to: (1) Calculate and withhold PPh 21 from each income payment, (2) Remit to the state treasury by the 10th of the following month (Article 21 para. 11, UU PPh), (3) File the monthly tax return by the 20th of the following month (Article 21 para. 12, UU PPh), (4) Issue Form 1721-A1 (withholding certificate) by end of January of the following year. The TER rate depends on the taxpayer's PTKP status (TK, K, K/I) and income level, ranging from 0% to 30% progressively per category.
This article is for education, not tax advice.
Example
Budi, single with status TK/0, earns Rp 12 million/month. Under PMK 168/2023, Budi falls into TER Category A. His monthly effective TER rate is 1.5%, so PPh 21 withheld = Rp 12 million × 1.5% = Rp 180,000/month. The employer remits Budi's PPh 21 to the state treasury by the 10th of the following month. At end of January, the employer issues Form 1721-A1 showing PPh 21 withheld of Rp 2,160,000 for the year, which becomes a tax credit on Budi's annual return.
Source: Article 21 UU PPh (Law No. 36/2008); PMK No. 168/PMK.03/2023; Article 21 para. 11-12
Related terms