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Tax Glossary
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.
Tax Glossary
Monthly Tax Return (SPT Masa)
The Monthly Tax Return (SPT Masa) is the form used by taxpayers to report and/or pay tax due in a one-month tax period. Governed by Article 3 paragraph (1) of UU KUP. Unlike the Annual Return (SPT Tahunan), the SPT Masa is filed monthly. Common types: SPT Masa PPh 21 (due by 20th), PPh 23 (20th), PPh 25 (20th), and SPT Masa PPN (end of following month). Late filing penalties: Rp 100,000 per income tax monthly return; Rp 500,000 per VAT monthly return.
Tax Glossary
Tax Withholding Certificate
A Tax Withholding Certificate is an official document issued by the withholding agent (employer, treasurer, or other payment maker) as proof that tax has been deducted from the taxpayer's income. Governed by Article 23 paragraph (1) of Law No. 28/2007 on General Tax Provisions and Procedures (UU KUP) and Ministry of Finance Regulation No. 168/PMK.03/2023 for PPh 21. For permanent employees, the PPh 21 withholding certificate is Form 1721-A1. For civil servants, military personnel, and police, Form 1721-A2 is used. The certificate must be issued and delivered to the income recipient within one month after the tax year ends, typically by end of January. This document serves three critical purposes: (1) Proof that tax withholding occurred, (2) Tax credit when filing the annual return, (3) Supporting documentation for claiming refunds (restitusi) if there is excess tax paid.
Tax Glossary
TER (Effective Average Rate)
TER (Tarif Efektif Rata-rata / Effective Average Rate) is the method for calculating PPh Article 21 withholding effective January 1, 2024 under Ministry of Finance Regulation No. 168/PMK.03/2023. TER replaces the more complex monthly progressive rate method with a simpler, more transparent calculation. There are two types of TER: (1) Monthly TER, used for January through November of each year, (2) Annual TER (using Article 17 para. 1 rate), used for December as the final tax settlement for the year. TER is divided into three categories based on the taxpayer's PTKP (non-taxable income) status: Category A: Single with TK/0, TK/1, or Married K/0 (basic/entry status), Category B: TK/2, TK/3, Married K/1, or K/2 (intermediate status), Category C: Married K/3 (highest status). The complete TER table with detailed rates for each income range is in the Annex to PMK 168/2023. Each month, withholding agents use this table to calculate PPh 21 based on salary level and employee PTKP status.
Tax Glossary
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).
Tax Glossary
Article 29 Income Tax (Balance Due)
PPh Article 29 is the remaining tax balance payable at year-end after deducting all tax credits paid or withheld throughout the year. Governed by Article 29 of Law No. 36/2008 on Income Tax (UU PPh). PPh 29 is calculated as: Annual Tax Liability (from annual return) MINUS Total Tax Credits (PPh 21, 25, 22, 23, 24, etc.). If the result is positive, it is PPh 29 (balance due), which must be paid. If the result is negative, it is PPh 28 (overpayment), which may be refunded or carried forward. PPh 29 must be settled before filing the annual return: by March 31 for individual taxpayers and April 30 for corporate taxpayers (Article 3 para. 3, UU KUP). Late payment incurs interest penalty of 2% per month (Article 9 para. 2b, UU KUP).
Tax Glossary
NPWP (Tax Identification Number)
NPWP (Nomor Pokok Wajib Pajak), or Tax Identification Number in English, is a unique 16-digit identifier issued by Indonesia's Directorate General of Taxes (DJP) to every taxpayer for tax administration purposes. Governed by Article 2 of Law No. 28/2007 on General Tax Provisions and Procedures (UU KUP). Since January 1, 2024, per Ministry of Finance Regulation No. 112/PMK.03/2022, NPWP integrates the National Identification Number (NIK) for individual resident taxpayers. Without an active NPWP, taxpayers face income tax withholding at 120% of the normal rate (Article 21 paragraph 5a of Law No. 36/2008 on Income Tax). NPWP is mandatory for: (1) Individuals with income above the non-taxable threshold (PTKP), (2) Entrepreneurs conducting business in Indonesia, (3) Recipients of various income sources. An NPWP is required to file tax returns, claim refunds, transact with government agencies, and open bank accounts.
Tax Glossary
Tax Borne by Government (DTP)
Tax Borne by Government, abbreviated DTP from the Indonesian "Ditanggung Pemerintah", is a tax facility under which the tax that would normally be owed is paid by the government through the tax subsidy line of the state budget rather than by the relevant taxpayer. The scheme applies to several taxes, notably Income Tax (PPh) and Value Added Tax (PPN), and is generally limited to a defined period and specific sectors. The government uses DTP as a short-term fiscal stimulus to support household purchasing power, accelerate recovery in specific industries, or back strategic sectors. Taxpayers continue to report transactions as usual, but the tax amount is recorded as borne by the government. The legal basis for each DTP facility is set by a separate Minister of Finance Regulation that defines the criteria, validity period, and reporting procedures.