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The IDR 5 Million x 5% Salary Formula Calculation is Incorrect! Our Calculation is Accurate.
There has been a lot of debate on the Internet and media coverage recently over the new tax rate (5%) for those making IDR 5 million per month

The IDR 5 Million x 5% Salary Formula Calculation is Incorrect! Our Calculation is Accurate.

January 2023

There has been a lot of debate on the Internet and media coverage recently over the new tax rate (5%) for those making IDR five million per month. Most people believe it to mean that they must pay a monthly tax of IDR 250,000, or IDR 5,000,000 million multiplied by 5%.

That is incorrect! The following provides a detailed explanation of how income tax is calculated under the new rules for a monthly salary of IDR five million.

With the passage of Law No. 7 of 2021 Concerning Harmonization of Tax Regulations, on October 29, 2021, certain clauses in previous tax laws (UU HPP) underwent minor revisions.


Information on the Harmonization of Tax Regulations (UU HPP)

The government modified a number of taxation-related provisions through the new HPP Law which went into effect on January 1, 2022. The new law includes a number of modifications to the previous laws and practices surrounding general taxes, income tax, value-added tax, and sales tax on upscale items. The government also increased the number of layers/tiers of taxable income (PKP) per year from four to five.

The income taxes for individual taxpayers has not increased as a result of the regulation change. In fact, the inclusion of an additional income tax tier offers tax relief to people in the lower middle class who will now pay less in taxes as a result of the new tariffs.
 

According to the new HPP Law, a hypothetical computation of  zero tax for individuals earning IDR 5 million per month would be as follows:

  • Taxable Income (PKP) =  Gross Income - PTKP
  • Annual Income Tax = Taxable Income (PKP) x Tax Rate
  • The amount of PTKP based on the HPP Law has not changed, it remains IDR 54,000,000 million per year.
     

For instance, an employee earning IDR 5 million per month ( Gross) and Zero THR would have the following income tax calculation:

Gross Income - PTKP = Taxable Income (PKP).

IDR 60,000,000 million, minus (-) IDR 54,000,000 million = IDR 6,000,000 million

IDR 6,000,000 million is taxable income (PKP) per year.
 

Income Tax per year = Taxable Income (PKP) x Tax Rate

PPh per year = IDR 6,000,000 million x 5% = IDR 300,000.00

Individuals earning IDR five (5) million per month pay IDR 300,000 in income tax annually, or IDR 25,000 per month, before and after the HPP Law was passed. Before or after the law's passage, there is no additional tax that must be paid by anyone who makes more than IDR five million per month.
 

Table I:  Non Taxable Income (PTKP)

Depending on the circumstances, non-taxable income may have a varied value. The cumulative value of the following sums makes up the amount:

  • IDR 54,000,000 for individual taxpayers
  • An additional IDR 4,500,000  for married .
  • An additional IDR 54,000,000 when Wife has her own business income
  • An additional* IDR 4,500,000 per family member is given for dependents (maximum 3 people).

* Dependents obtained include adopted children as well as members of the blood family and straight-line relatives.
 

Table II: According to the status of the taxpayer's non-taxable income (PTKP), the amount is as indicated.

Male or Female (Single)

Male (Married)

Husband and Wife (Merged)

TK/0 — IDR 54,000,000

K/0 — IDR 58,500,000

K/I/0 — IDR 112,500,000 

TK/1 — IDR 58,500,000

K/1 — IDR 63,000,000

K/I/1 — IDR 117,000,000

TK/2 — IDR 63,000,000

K/2 — IDR 67,500,000

K/I/2 — IDR 121,500,000 

TK/3 — IDR 67,500,000

K/3 — IDR 72,000,000

K/I/3 — IDR 126,000,000

* Taxpayer (TK 0)
** Married Tax Payers (K/0)
*** Married Taxpayers, Husband-Wife joining income (K/I)
**** Burden (1, 2, and 3)
 

Taxpayer Rights Are Protected by the Law and Shouldn’t be Rejected Lightly.

The HPP law's provisions addressing layers of income tax rates are thought to be fairer than they were previously and more pertinent to people's present incomes. Instead of being more onerous, the new tax rate offers benefits to individual taxpayers. Low-income taxpayer rates are protected, whereas high-income earners must pay higher taxes.

For expert tax advice and services and additional details regarding your taxes, please get in touch with us via the following: contact-Jakarta@moores-rowland.com or contact-Bali@moores-rowland.com.

**By: Stefani W. Anggraeni — Marketing Communications & Social Media Specialist