Government Reviews Proposal to Exempt Workers' Holiday Allowance from Tax

Jakarta – The Minister of Manpower, Yassierli, has responded to workers’ demands that the holiday allowance (THR) not be subject to Article 21 income tax.

Yassierli confirmed that the 2026 THR will remain subject to income tax under Article 21 in accordance with applicable regulations.

“As per regulations,” she told reporters in Jakarta on Tuesday, 3 March 2026.

“We must review (the proposal) again,” Yassierli said.

THR is considered part of employee income and falls within the scope of Article 21 income tax.

Government Regulation Number 58 of 2023 governs the calculation of THR tax using the effective average rate (TER) mechanism. The TER scheme is divided into three categories: TER monthly A, TER monthly B, and TER monthly C.

Classification is based on the amount of non-taxable income (PTKP) in accordance with the taxpayer’s marital status and number of dependents.

The applicable tax rates range from 0 to 34 per cent, with the exact rate depending on the employee’s monthly income.

Civil servants, the military, and the police have different provisions. Government Regulation Number 14 of 2024, updated in 2025 and 2026, stipulates that income tax on the THR and 13th month salary is borne by the government.

This arrangement allows civil servants to receive their full THR without any tax deductions from their personal income.