Expatriates are foreign citizens who work in Indonesia for a specific period. They are typically recruited by companies or organizations to meet specific needs, such as international project development, skill enhancement, or support for global operations. The presence of expatriates in Indonesia is a common phenomenon in the era of globalization, but they must also understand and comply with tax obligations, including Income Tax (Pajak Penghasilan or PPh) in the country where they work.
According to Article 2 of the Income Tax Law, tax subjects within the country include individuals, both Indonesian citizens and foreign nationals who:
- Reside in Indonesia.
- Stay in Indonesia for more than 183 days, not necessarily consecutively, but determined by the number of days the individual is in Indonesia within a 12-month period since their arrival in Indonesia.
- Are in Indonesia in a tax year and have an intention to reside in Indonesia.
Therefore, it can be concluded that expatriates working in Indonesia fall under the category of tax subjects within the country, and they will be subject to Income Tax Article 21, similar to other domestic taxpayers, for income received in Indonesia.
When calculating Income Tax Article 21 on the income of expatriates who are considered tax subjects within the country in the middle of the year, Income Tax Article 21 is calculated based on the annual net income. The annual net income is the total net income for the entire year, calculated by multiplying the monthly net income by 12 months.
How to Calculate Income Tax Article 21 for Mid-Year Expatriates?
Robert married with two children (K/2) began working on August 1, 2022. He worked in Indonesia until August 2024. During the year 2022, he received a monthly salary of Rp 40,000,000. The calculation of Income Tax Article 21 for the month of August 2022, considering that Robert only received income in the form of a salary in Indonesia, is as follows:
|Monthly Salary||Rp 40.000.000|
|5% X Rp 40.000.000,00 = Rp 2.000.000,00|
|Maximum Occupational Allowance per month||Rp 500.000|
|Net Monthly Income|
|Net Annual income|
|5 x Rp 39.500.000||Rp 197.500.000|
|Net Yearly Income Considered|
|12/5 x Rp 197.500.000||Rp 474.000.000|
|Non Taxable Income|
|– For the taxpayer alone||Rp 54.000.000|
|– Additional for being married||Rp 4.500.000|
|– Additional for 2 children|
|Total Annual Allowance (Rp 4.500.000 X 2)||Rp 9.000.000|
|Total Taxable Income for the Year||Rp 406.500.000|
|Income Tax Art. 21 Due|
|5% X Rp 60.000.000||Rp 3.000.000|
|15% X Rp 190.000.000||Rp 28.500.000|
|25% X Rp 156.500.000||Rp 39.125.000|
|Income Tax Art. 21 Due for the year 2022|
|5/12 X Rp 70.625.000||Rp 29.427.083|
|Monthly Income Tax Art. 21 Due|
|1/5 X Rp 30.052.083||Rp 5.885.416|
The tax rates and calculation mechanisms are essentially the same, but expatriates have the peculiarity that their income is considered on an annual basis even if it does not exceed the Personal and Family Allowance (PTKP).
Written by: Renny Sadikin
Picture: CoWomen: https://www.pexels.com/photo/three-woman-sitting-on-white-chair-in-front-of-table-2041627/