It's Official: Government to Cover Income Tax for Employees Earning Below IDR 10 Million, Check the Requirements!
The government will cover ITA 21 for employees in labor-intensive industries. This facility will only be available to employees earning a maximum of IDR 10 million per month or an average of IDR 500,000 per day if wages are paid daily, weekly, piece-rate, or contract basis.
This provision is regulated under the Minister of Finance Regulation (PMK) Number 10 of 2025 (PMK 10/2025). The regulation specifies that the industries eligible for this facility include footwear, textiles and apparel, furniture, as well as leather and leather goods industries.
The eligible industries for the ITA 21 tax coverage are determined based on the business classification codes (KLU) outlined in PMK 10/2025. The government-funded ITA 21 facility applies from the January 2025 tax period until the December 2025 tax period.
In total, the government has designated 56 industry sectors as eligible for this facility, as listed in the annex of the regulation.
Criteria for Taxpayers Eligible for the Incentive
This facility is available to both certain permanent employees and certain non-permanent employees.
Criteria for Eligible Permanent Employees:
- Must have a Taxpayer Identity Number (TIN) and/or a Population Identity Number (NIK) that is integrated with the Directorate General of Taxes (DGT) system.
- Earn a fixed and regular gross income of up to IDR 10 million per month as of the January 2025 tax period.
- Must not be receiving any other government-covered Income Tax Article (ITA) 21 incentive.
Criteria for Eligible Non-Permanent Employees:
- Must have a TIN and/or NIK that has been matched with the tax system.
- Receive wages averaging up to IDR 500,000 per day (if paid daily) or up to IDR 10 million per month (if paid monthly).
- Must not be receiving any other government-covered ITA 21 incentive.
Income Criteria
The gross income eligible for the government-covered ITA 21 facility includes salaries and allowances that are fixed and regular per month, or similar forms of compensation that are fixed or regular. This income may be provided under any name and in any form, including benefits in kind and/or other fringe benefits.
Utilization of ITA 21 Incentive
Regarding the technical implementation of the government-covered Income Tax Article (ITA) 21 incentive, several key points need to be considered:
1. Direct Payment to Employees
The government-covered ITA 21 incentive is paid in cash by the employer to the employee or income recipient at the time of salary payment.
2. Not Considered Taxable Income
The incentive paid directly to employees is not included as taxable income for ITA 21 calculations.
3. Employers Must Issue Withholding Tax Slips
Employers are required to issue withholding tax slips for the payment of the government-covered ITA 21 incentive. The preparation of withholding tax slips must comply with applicable tax regulations.
4. No Refunds or Offsetting Allowed
If the government-covered ITA 21 amount provided exceeds the total tax due for the fiscal year, the excess cannot be refunded or offset.
Similarly, if an employer utilizing this incentive submits a Withholding Tax Return (Periodic ITA 21/26) stating an overpayment, the excess cannot be refunded or offset.
5. Employers Must Submit Reports
Companies utilizing the government-covered ITA 21 incentive must submit a monthly utilization report through the Withholding Tax Return (Periodic TA 21/26), covering the January to December 2025 tax periods.
To ensure that the incentive distribution complies with all provisions set out in PMK 10/2025, the Directorate General of Taxes (DGT) will conduct monitoring.
Therefore, if an employer fails to provide the incentive to employees, the employer must remit the deducted Income Tax Article (ITA) 21.
In an official statement, the DGT stated that this incentive is expected to serve as an economic stimulus in 2025, as it aims to help sustain public purchasing power. (ASP/KEN)
