Recently, Directorate General of Taxation has implemented Government Regulation (PP) 41 Year 2016 regarding Treatment Of Income Tax Article 21 On Employees’ Income From Employers Under Certain Criteria. The sole puIDR ose of implementing this Regulation is to enhancing industrial competitiveness in certain sectors oriented to export and to support theGovernment’s programs in the effort to create and absorb employment.
Employees who is receiving income from employers under certain criteria with the amount of Taxable Income in 1 (one) year not more than IDR 50,000,000.00 (fifty million rupiah), shall enjoy the deduction of final Income Tax Article 21 at the rate of 2.5% (two point five percent) instead of 5% (five percent) and non-final prior to implemention of this Regulation.
This benefit did not apply in the event that the realization of amount of Taxable Income of employees has exceeded IDR 50,000,000.00 (fifty million rupiah) in 1 (one) year. Deduction of final Income Tax at the rate of 15% (fifteen percent) for the income exceeding IDR 50,000,000.00 shall remain the same.
Further, the employers under certain criteria as referred above must meet the following requirements such as; conducting business activities in the industrial field of footwear, textile and textile product, employing direct employees at the minimum of 2,000 (two thousand) persons, bearing Income Tax Article 21 of their employees, conducting export not less than 50% (fifty percent) of the total annual sales value in the previous year, having a collective labor agreement, including their employees in the Manpower Social Security Administrative Agency program from the Manpower Social Security Administrative Agency program, and not receiving or utilizing Income Tax facility based on Article 31A of Law Number 7 Year 1983 regarding Income Tax as amended for several times with the most recent amendment by Law Number 36 Year 2008 regarding the Fourth Amendment to Law Number 7 Year 1983 regarding Income Tax or Income Tax facility based on Article 29 of Government Regulation Number 94 Year 2010 regarding the Calculation of Taxable Income and Payment of Income Tax in the Current Year.
This Regulation has incited reaction from one of the industrial fields in subject. According to Ade Sudrajat, Chairman of Asosiasi Pertekstilan Indonesia (API), rate deduction would not having much helpful impact for textile and footwear industries who are paying for their employees’ tax since the Government through Regulation of The Minister Of Finance Of The Republic Of Indonesia (MoF) 101/PMK.010/2016 regarding Adjustment Of Amount Of Non- Taxable Incomes has made adjustment to the provisions on amount of non-taxable incomes (PKP) which come into effect in Januari Fiscal Year 2016 onwards. With this deduction, there will be fewer employees who could enjoy the deduction Article 21 Income Tax at the rate 50% (fifty percent). Ade also added that the Government needs to stipulate other regulative means to spur the growth of textile and footwear industries, for example by not burdening the Value Added Tax (VAT) for raw materials purchased onshore which would be exported offshore after production. Moreover, these industries also expect to be facilitated a more integrated supply chain to reduce its production cost.
The provisions on rate of the Deduction of Income Tax Article 21 as referred above shall be applicable to July 2016 Tax Period up to December 2017 Tax Period, and came into effect as per 17 October 2016. (HO)
1. Peraturan Pemerintah Republik Indonesia Nomor 41 Tahun 2016
2. http://www.republika.co.id/berita/ekonomi/makro/16/10/30/ofuw2r382-pemotongan-pph-buruh- tekstil-tak- cukup-berdampak- ke-industri