Decoding the Taxability of Benefits in Kind
Through Minister of Finance Regulation (PMK) Number 66 of 2023, the government has officially issued technical regulations which govern the taxation of benefits in kind or enjoyed, effective from July 1, 2023.
Prior to this, the government had issued Government Regulation (PP) Number 55 of 2022 under Law Number 7 of 2021 on Tax Regulation Harmonization (UU HPP). According to Article 30 of the PP, employers or other remuneration providers who offer benefits in kind and/or enjoyment are required to deduct income tax (PPh) in line with tax legislation provisions.
The regulation, signed by Minister of Finance Sri Mulyani on June 27, 2023, covers several points. Firstly, it addresses the taxability of benefits in kind.
In relation to this, several provisions were established including that expenses for office facilities can be deducted from gross income to determine the taxable income by the employer or the party providing the remuneration or office facilities. This is as long as they are expenses incurred to obtain, collect, and maintain income.
The regulation also states that expenses for compensation or remuneration related to employment are expenses for compensation or remuneration in the context of the relationship between the employer and the employee.
The regulation further stipulates that expenses for compensation or remuneration in the form of office facilities with a useful life of less than 1 (one) year should be charged in the year the expenses are incurred.
The detailed categories of office facilities covered by the regulation include:
- Food, food ingredients, beverages, and/or drinks for all employees;
- Natura and/or enjoyment provided in specific areas;
- Natura and/or enjoyment that must be provided by the employer in carrying out work;
- Natura and/or enjoyment funded by the state budget, regional budget, and/or village budget; or
- Natura and/or enjoyment with specific types and/or limitations.
These regulations aim to provide clarity and guidance on the tax treatment of office facilities received by employees. It is important for employers and employees to familiarize themselves with the specific provisions outlined in Minister of Finance Regulation No. 66/2023 to ensure compliance with the tax requirements.
We would be thrilled to have a chat with you and dive deeper into the details, making sure you grasp all the ins and outs of this regulation. Don't hesitate to reach out to us anytime. We're just a click or a call away. Let's decode the complexities of taxes together and make them enjoyable and informative! Contact us at contact-Jakarta@moores-rowland.com or contact-Bali@moores-rowland.com to learn more about our services.