Private-Sector Employees’ THR Is Taxable: See How to Calculate It Here
Private-Sector Employees’ THR Is Taxable: See How to Calculate It Here
Jakarta, CNBC Indonesia – The payment of the Tunjangan Hari Raya (THR) ahead of Eid al-Fitr is one of the moments awaited by workers across the country, both civil servants and private employees. Unlike civil servants, private employees are still required to pay tax on the THR they receive.
This is because, under Director General of Taxes Regulation PER-16/PJ/2016 on Technical Guidelines for Withholding, Payment, and Reporting of Income Tax Article 21 and/or Income Tax Article 26 Related to Wages, Services, and Activities of Individuals, THR falls into the category of non-regular income that is subject to income tax (PPh) Article 21.
Income tax withholding (PPh 21) on THR follows a progressive tax rate scheme. With the implementation of the average effective rate (TER) based on Financial Ministry Regulation No. 168 of 2023 on Guidelines for Withholding Tax on Income Related to Jobs, Services, or Activities of Individuals PMK 168/2023, the calculation of THR tax is now more structured and easier for workers.
THR is categorised as additional, non-regular income, so withholding refers to the PPh 21 rate that differs from the regular monthly income received by permanent employees.
THR Tax Calculation Simulation
For example, Mr A with a monthly salary of Rp5 million receives a THR of one month’s salary in March 2025. Mr A is married and has no dependents. The calculation steps are as follows:
- Determine Monthly Effective Tax Rate Category
Based on PP 58/2023, Mr A falls into TER Monthly Category A because he has PTKP K/0.
- Apply the Average Effective Rate
Based on the TER Monthly Category A:
Mr A has total income of Rp10 million. Income Rp9,650,001 to Rp10,050,000 is taxed at an effective rate of 2%.
- THR Tax Withholding
If TER is 2%, the tax on salary and THR in March 2025 is 2% x Rp10 million = Rp200 thousand. Tax of Rp200 thousand will be directly withheld from the salary and THR received in March, so Mr A will take home Rp9,800,000.
At year-end, Mr A’s income for 2025 will be re-calculated using progressive rates under Article 17 of Law No. 7 of 1983 on Income Tax (UU PPh), as amended several times most recently by Law No. 7 of 2021 on Harmonisation of Tax Regulations (UU HPP).
Does an Employee Need to Report THR in the Annual Tax Return (SPT)?
THR received by employees is automatically taxed by the employer through the PPh 21 withholding mechanism. However, for taxpayers with other additional income or income from more than one employer, they are still required to report all income in the Annual Tax Return (SPT).
Employees should ensure that the income reported in the SPT matches the Withholding Certificate 1721-A1 issued by the company, or the Withholding Certificate 1721-A2 for civil servants/police/armed forces. This ensures no discrepancy between income received and tax withheld.