Frequently Asked Questions: #pph21

Sometimes — but manage your expectations about the process.

The situation arises when an expatriate departs partway through a tax year: PPh 21 has been withheld monthly on the assumption of a full year’s income, so the tax actually withheld can exceed the liability for the shortened year. On paper, that excess is refundable.

In practice:

• A refund claim is made through the annual individual return (SPT) for the departure year, filed after year-end
• Any refund claim invites verification or audit by the tax office before payment — the DJP does not simply pay out on the return’s arithmetic. Documentation (Form 1721-A1 from the employer, proof of departure, deregistration) must be in order
• The process runs months, and being outside Indonesia does not excuse the taxpayer from responding to information requests — an authorised local representative is essential
• Deregistering the NPWP (“NE” status) is the proper close-out for a permanent departure, and is worth doing regardless of whether a refund is pursued: an NPWP left active accrues filing obligations and, eventually, penalties

The economic decision is honest arithmetic: for a modest over-withholding, the cost and duration of an audit-backed refund claim can exceed the refund; for a substantial one (senior expatriates departing early in the year), the claim is well worth pursuing professionally.

What not to do: leave, ignore the final return, and let the NPWP fester. The unfiled-return penalties are small individually but accumulate, and an unresolved tax record resurfaces at the worst moments — new visas, new ventures, or that refund you later decide to claim.

Okusi handles departure-year returns, refund claims and NPWP deregistration for departing expatriates.

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The process for calculating and reporting payroll and PPh 21 (salary tax) for employees in Indonesia involves several steps:

Payroll Calculation: * Determine the employee’s gross salary, including basic salary and any allowances * Calculate deductions such as BPJS Kesehatan (health insurance) and BPJS Ketenagakerjaan (social security) * Apply the appropriate PPh 21 tax rate based on the employee’s annual taxable income

PPh 21 Calculation: * Since January 2024 (PP 58/2023), monthly withholding for January through November is calculated using government-set average effective rates (TER) applied to gross monthly income * In the December tax period, perform an annual recalculation of the employee’s taxable income using the progressive tax rates (UU HPP, effective 2022): * 5% for income up to IDR 60 million * 15% for income between IDR 60 million and IDR 250 million * 25% for income between IDR 250 million and IDR 500 million * 30% for income between IDR 500 million and IDR 5 billion * 35% for income above IDR 5 billion * Adjust for any applicable deductions or tax allowances

Reporting Process: * Prepare monthly PPh 21/26 tax returns (SPT Masa) via the DJP Coretax system * Pay the withheld tax by the 15th of the following month (PMK 81/2024) and file the monthly return by the 20th of the following month * Provide employees with an annual withholding slip (Form BPA1, formerly Form 1721-A1) detailing their income and tax withheld * Perform the annual reconciliation in the December-period PPh 21 return; employees file their own annual individual tax returns by March 31st of the following year

Important Considerations: * Ensure compliance with the latest tax regulations and rates * Maintain accurate records of all payroll calculations and tax payments * Use appropriate payroll software to streamline calculations and reduce errors * Consider seeking professional assistance for complex payroll situations or to ensure full compliance

Okusi Associates offers comprehensive payroll and tax reporting services, including PPh 21 calculations and submissions, as part of their accountancy and tax reporting package for PMA companies in Indonesia.

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