BERITA TERKINI
Muhammad Farrel Arkan,
Allow me to introduce myself, I am Faisal. I serve as a tax staff at a metal furniture manufacturing company under the business classification (klasifikasi lapangan usaha/KLU in Indonesian) code 31004. I recently learned that the government has issued a regulation related to the government-borne (ditanggung pemerintah/DTP Art. 21 Income Tax incentive.
My question is, how can our company make use of this incentive? Kindly note that our company only employs permanent employees at this time. Please explain. Thanks.
Faisal, Bogor
Thank you for your inquiry, Mr. Faisal. To respond to your question, we can refer to Law No. 7 of 1983 concerning Income Tax as last amended by Law No. 6 of 2023 concerning the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 concerning Job Creation into a Law (ITL as last amended by Job Creation Law).
To begin with, it is essential to understand that the income received by an employee in connection with employment must be subject to withholding tax by the employer pursuant to the provisions stipulated under Article 21 paragraph (1) subparagraph a of the ITL as last amended by the Job Creation Law. Technically, Art. 21 Withholding Tax will later have an impact on the take home pay (THP) derived by the employee depending on the Art. 21 Income Tax method applied by the employer.
In terms of the government-borne Art. 21 Income Tax incentive you inquired, the burden of Art. 21 Income Tax is no longer on the employee or employer. Instead, the tax burden is now assumed by the government, thereby, no longer affecting the THP derived by the employee.
The provisions related to the granting of the government-borne Art. 21 Income Tax incentive have recently been issued by the government through the Minister of Finance Regulation No. 10 of 2025 concerning Government-Borne Article 21 Income Tax on Certain Income in the Context of Economic Stimulus for the 2025 Fiscal Year (MoF Reg. 10/2025).
Pursuant to Article 2 paragraph (2) of MoF Reg. 10/2025, the government-borne Art. 21 Income Tax incentive is granted to all gross income for the January to December 2025 taxable periods given by employers with certain criteria to certain employees. This implies that the incentive is selectively granted, only if both employer and employee requirements are fulfilled.
From the employer’s perspective, two requirements that must be cumulatively satisfied pursuant to Article 3 paragraph (1) of MoF Reg. 10/2025. First, the employer conducts business activities in the following industrial sectors:
footwear;
textiles and apparel;
furniture; or
leather and leather goods.
Second, the employer has a business classification (klasifikasi lapangan usaha/KLU in Indonesian) code listed in Appendix letter A of MoF Reg. 10/2025.
In relation to your company, please note that the KLU code 31004 is listed in the appendix. Therefore, technically, your company has fulfilled both of the requirements stipulated under Article 3 paragraph (1) of MoF Reg. 10/2025.
However, before you can benefit from the government-borne Art. 21 Income Tax incentive, you are also required to ensure that the employees intended to receive the incentive meet the required criteria. In this regard, Article 4 paragraph (1) of MoF Reg. 10/2025 classifies certain employees eligible for the government-borne Art. 21 Income Tax incentive into two groups, namely, (i) certain permanent employees; and/or (ii) certain non-permanent employees. The distinction is due to differences in the eligibility criteria between the two groups.
As for the context of your question, permanent employees are required to fulfil three cumulative criteria, including:
1. having a taxpayer identification number (TIN or nomor pokok wajib pajak/NPWP in Indonesian) and/or national identification number (nomor induk kependudukan/NIK in Indonesian) administered by the Directorate General of Population and Civil Registration as well as havs been integrated with the administration system of the Directorate General of Taxes (DGT);
2. receiving or accruing fixed and regular gross income not exceeding IDR10,000,000 in:
a. the January 2025 taxable period, for certain employees who start working before January 2025; or
b. the taxable period of the first month of employment, for certain employees who start working in 2025; and
3. not receiving other government-borne Art. 21 Income Tax incentives pursuant to statutory laws and regulations in the field of taxation.
Further, if the criteria for both the employer and employees have been satisfied, the next aspect that must be carefully considered is the utilisation and reporting of the incentive. This aspect is critical to the effective use of the government-borne Art. 21 Income Tax incentive.
Pursuant to Article 5 paragraph (3) of MoF Reg. 10/2025, the employer is required to prepare a withholding receipt that includes the government-borne Art. 21 Income Tax incentive. Also check out ‘New MoF Reg.! Labour-Intensive Sectors Employees Eligible for Income Tax Incentives.’
In addition, the employer is also required to report the utilisation of the government-borne Art. 21 Income Tax incentive. The reporting is carried out through the filing of periodic Art. 21/26 Income Tax returns (surat pemberitahuan/SPT in Indonesian) for the January 2025 to December 2025 taxable periods. The tax return filing is recognised as the reporting on the use of the incentive provided that the returns are filed no later than 31 January 2026 pursuant to the provisions under Article 6 paragraph (4) of MoF Reg. 10/2025.
It is important to note that if the periodic Art. 21/26 Income Tax returns are filed after the deadline, the filing will not be regarded as a reporting of the incentive utilisation. Consequently, the government-borne Art. 21 Income Tax incentive for the January 2025 to December 2025 taxable periods will not be granted. This is stated in Article 6 paragraph (5) of MoF Reg. 10/2025.
In conclusion, there are three key aspects to consider to benefit from the government-borne Art. 21 Income Tax incentive pursuant to MoF Reg. 10/2025. First, both the employer and the employees must fulfil the specified criteria and requirements. Second, the employer is required to prepare withholding receipts that include the government-borne Art. 21 Income Tax incentive. Third, periodic Art. 21/26 Income Tax returns must be filed on time.
That concludes our response. We hope this satisfies your inquiry.
On another note, the Tax Consultation article is published weekly to answer selected questions from DDTCNews’ loyal readers. If you would like to submit a question, please send it to the email address [email protected]. (sap)
