Currently, there are many foreign nationals working in Indonesia. Of course, these foreign workers have to do tax reporting for every job they have. But unfortunately, there are still not so many foreign citizens who understand the Indonesia tax rate for foreigners for taxable income, here is an explanation.
Legal Basis for Determining Indonesia’s Tax Rate For Foreigners for Foreign Workers
Generally, companies recruit foreign workers or foreign workers to support performance and achieve their targets. In other words, foreign workers are able to meet the company’s needs that local employees or Indonesian citizens cannot do.
The regulation for determining the Indonesia tax rate for foreigners is included in the applicable legislation. This is regulated in Presidential Regulation Number 20 of 2018 which discusses the use of foreign workers or foreign workers. The aim is none other than to supervise every business person to be more selective in choosing foreign workers.
The rules regarding tax income for Foreign Workers are of two kinds. Some of them are Income Tax Article 26 (Pph 26) and Income Tax Article 21 (Pph 21). Where foreign workers who work in Indonesia for less than 183 days for 12 months will be subject to Pph 26.
It is different with foreign workers who work in Indonesia for more than 183 days in a year will be subject to Pph 21. This also applies to foreign nationals who reside and have their own business in Indonesia and will be subject to the Indonesia tax rate for foreigners under the article system of Pph 21. just now.
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How to Calculate the Taxable Income of Foreigners Through the Indonesia Tax Rate For Foreigners? This is the answer!
As additional information, the determination of income tax for Foreign Workers is contained in Law No. 36 of 2008 Article 2 Paragraph 4. For more details, see the review of the article below on how to calculate taxable income for Foreign Workers.
1. The formula for Calculating Taxable Income Rates for Foreigners Through the Indonesia tax rate for foreigners Pph 26. system
The policy regarding gross foreign workers including business operations, workers, and so on in the Pph 26 system is regulated in Law No. 36 of 2008 Article 26 Paragraph 1. Where all gross income of foreign workers which includes work, business operations, and the like will be cut to 20 percent.
Where the method of calculating taxable income for Foreign Workers is obtained by the formula of 20 percent multiplied by the gross foreign workers. On the other hand, there are additional provisions regarding tariffs for the Double Taxation Avoidance Agreement. So the formula becomes gross foreign workers times the amount of the Indonesia tax rate for foreigners who have signed double taxation.
Furthermore, there is an example of a case of a foreign worker whose country did not sign the tax treaty or double taxation earlier. Where the Foreign Worker works less than 183 days with a salary in the year and month amounting to US$ 3,200.
Based on the exchange rate set by the Minister of Finance, the dollar to the rupiah exchange rate is Rp. 14,000. Before calculating using the Indonesia tax rate for foreigners Income Tax Article 26, it is better to change it to rupiah first to make it easier.
The trick is the gross income of foreign workers’ salaries of US$ 3,200, multiplied by Rp. 14,000. So the result is IDR 44,800,000 and then multiplied by 20 percent based on the Indonesia tax rate for foreigners with the Pph 26 system earlier.
Where IDR 44,800,000 multiplied by 20 percent equals IDR 8,960,000. Thus, the foreign worker received an income of Rp. 8,960,000 which has been deducted by tax according to Pph 26.
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The formula for Calculating Taxable Income Rates for Foreigners Through Indonesia Tax Rate For Foreigners Pph 21 System
You need to know that foreign nationals who wish to reside in Indonesia and If you also work for more than a year, will be subject to the Pph 21 tax system. With a note, your income exceeds PTKP, aka Non-Taxable Income. The amount reaches IDR 54,000,000 every year or the equivalent of IDR 4,500,000 per month.
In this case, there is a foreign worker who has been working since the middle of the year. Every month the Foreign Worker gets a salary of Rp. 25,000,000 which does not have any dependents because he is not married. Thus, the calculation of salaries for foreign workers according to Indonesia tax rate for foreigners in the Pph 21 system is as follows.
The monthly salary of Rp. 25,000,000 is multiplied by the cost of the position of 5 percent. So it becomes Rp. 1,250,000 which is then used as a benchmark to calculate the net monthly. Where Rp 25,000,000 was reduced by Rp 1,250,000 to Rp 23,750,000.
After that, calculate the net income of the Foreign Workers every 3 months, namely Rp. 23,750,000 multiplied by 3 to Rp. 71,250,000. Finally, to find out the net income of Indonesian Foreign Workers, the tax rate for foreigners in 12 months is just multiplied. So Rp 23,750,000 multiplied by 12 becomes Rp 285,000,000.
After that, you can immediately reduce it with the PTKP cost budget aka Non-Taxable Income that has been set earlier, which is IDR 54,000,000. The taxable income in the previous year was Rp. 285,000,000 minus Rp. 54,000,000 from the PTKP.
Thus, the Indonesia tax rate for foreigners that you can get through the PTKP system in one year is IDR 231,000,000. On the other hand, you should also know that the employer who is required to withhold tax is an individual or individual, entity, representative, or branch of a company.
Where the company must pay wages, salaries, allowances, honoraria, and so on to employees, management, and non-employees as a form of compensation. With the record of Indonesia tax rate for foreigners, it is still closely related to service activities and works being carried out.
Payments to non-employees are addressed to individuals or individuals who get income or gratuities. For example, an artist receives an honorarium or a bonus from the company.
After knowing the article review about the Indonesia tax rate for foreigners, hopefully, you will understand more about how to calculate taxable income for foreigners. If you need an income tax consulting service provider in Indonesia, then leave it to the experts. One of them is through Proconsultofficial.com so that all tax problems can be overcome.