Private Sector Holiday Allowances Can Avoid Tax, Here's How According to the Tax Directorate
Private sector employees’ Holiday Allowance (THR) is confirmed to be subject to Article 21 Income Tax (PPh 21).
According to Labour Minister Yassierli, the imposition of tax on 2026 THR for private sector employees and workers already complies with applicable regulations. However, this has caused social resentment, as the 2026 THR tax for civil servants is borne by the Government through the State Budget (APBN).
“(The proposal) needs to be examined further,” said Yassierli.
Nevertheless, the Director of Tax Outreach, Services and Public Relations at the Directorate General of Taxes (DJP), Inge Diana Rismawanti, stated that private sector employees and workers could receive their full THR without tax deductions.
“For private sector employees, there is also a tax allowance facility where the employer bears the tax, meaning the salary and THR received by employees will be intact if the company has a policy of bearing the Article 21 income tax of employees using a gross-up calculation scheme,” said Inge.
According to her, the gross-up scheme is a win-win solution for both the company and its employees. Companies willing to pay their employees’ taxes are allowed to deduct this from their gross income, which simplifies tax reporting to the DJP.
Additionally, there are private sector employees who do not face tax deductions on their THR. These employees work in certain sectors where their taxes are borne by the government. They are workers in labour-intensive sectors that drive the economy from the grassroots level upwards, such as textile workers, furniture makers, and leather craftspeople.
“There are also employees working in certain sectors who are provided with Article 21 income tax coverage by the government (DTP) throughout 2026 as regulated in PMK 105/2025,” she explained.
Furthermore, there are permanent private sector employees with monthly income not exceeding 10 million rupiah who also qualify for government-funded income tax coverage.