How to Calculate Income Tax Article 21 for Permanent Employees in December

For corporate taxpayers, December is a crucial period for fulfilling tax obligations, particularly regarding the calculation of Income Tax Article (ITA) 21 deducted from employees' income.  

Starting this year, the method of calculating ITA 21 has changed compared to previous years, following the implementation of the Average Effective Rate (TER) as regulated in the Minister of Finance Regulation (PMK) Number 168 of 2023.  

Under the TER method, the calculation of ITA 21 deductions for January-November differs from the December or final tax period.  

Read: Effective 1 January 2024, Regulation on the Use of Effective Rates of ITA 21 Released

For the January-November tax period, the ITA 21 deduction for permanent employees receiving monthly income is calculated using the monthly TER. Meanwhile, for the December tax period, the calculation must be based on the annual PPh Article 21 liability, using the ITA 21 rates outlined in Article 17 of the Income Tax Law.  

Monthly TER 

For permanent employees receiving a monthly salary, Income Tax Article 21 (ITA 21) is deducted monthly. The deduction is determined by multiplying the gross monthly income by the applicable TER.  

There are three TER categories: TER A, TER B, and TER C. The applicable TER is based on the non-taxable income (PTKP) threshold, which depends on marital status and the number of dependents as determined at the beginning of the tax year.  

1. TER A applies to employees with a PTKP of IDR 54 million per year, such as unmarried employees with no dependents (TK/0). It also applies to those with a PTKP of IDR 58.5 million, including unmarried employees with one dependent (TK/1) and married employees with no dependents (K/0).  
2. TER B applies to employees with a PTKP of IDR 63 million, such as unmarried employees with two dependents (TK/2) or married employees with one dependent (K/1). It also includes employees with a PTKP of IDR 67.5 million, such as unmarried employees with three dependents (TK/3) or married employees with two dependents (K/2).  
3. TER C applies to employees with a PTKP of IDR 72 million, such as married employees with three dependents (K/3).  

ITA 21 Payable for December Period

Meanwhile, the calculation of ITA 21 payable for December differs from previous tax periods. Generally, there are three steps that companies must follow.

First, calculate the ITA 21 deductions made during the January–November tax period based on the calculation using the TER.

The second step is calculating the total ITA 21 payable for the year. While the ITA 21 calculation using the TER refers to gross income, the annual ITA 21 calculation is based on taxable income (PKP).

To determine the PKP amount, first calculate the net income by subtracting the annual gross income from employment costs and pension contributions. In addition, zakat or mandatory religious donations paid through the employer can also be deducted from gross income.

After determining the net income, the next step is to calculate the PKP by subtracting the net income from the non-taxable income (PTKP). The detailed formula is as follows:

Gross Income	XXXXX
Employment cost	(XXXXX)
Pension contribution	(XXXXX)
Zakat/Religious Mandatory Contribution	(XXXXX)
Nett Income	XXXXX
PTKP	(XXXXX)
PKP	XXXXX

Then, the PKP amount is multiplied by the progressive tax rates outlined in Article 17 paragraph (1) letter a of the Income Tax Law, which consists of five brackets as follows:

Taxable Income Bracket	Rate
Up to IDR 60 million	5%
Above IDR 60 million to IDR 250 million	15%
Above IDR 250 million to IDR 500 million	25%
Above IDR 500 million to IDR 5 billion	30%
Above IDR 5 billion	35%

The third step is to subtract the total ITA 21 calculated with the TER (January–November period) from the annual ITA 21 payable to determine the ITA 21 payable for December. (ASP/CHY/AUD/KEN)