Private-sector THR tax issue, Purbaya: Tax policy to be administered fairly

Jakarta – Finance Minister Purbaya Yudhi Sadewa said tax policy will be administered fairly, in response to criticism over tax deductions on the thirteenth month allowance (THR) for workers in the private sector.

“We will implement taxation that is fairly administered,” Purbaya told reporters at the Ministry of Finance in Jakarta on Friday.

He explained that THR tax treatment for civil servants (ASN) is borne by the government since they work in government offices. Therefore, for private-sector employees, he advised to voice their concerns to their company’s management.

“For ASN it’s borne by the government, boss. So if the private sector protests, protest to the boss,” he added.

The Minister also doubted the potential for changes to the policy on THR tax borne by the government for the private sector. “It’s difficult to change this partial regulation to satisfy just one side,” he said.

In the same event, Directorate General of Taxes Bimo Wijayanto said private-sector workers have their own allowances regulated by each company. He also stated that implementing the Average Effective Tax Rate (TER) has no impact on tax deductions, as TER is intended to distribute the tax burden monthly rather than alter the amount of tax payable.

“Actually there’s no problem; it (TER) even makes it easier for taxpayers to share the burden monthly,” Bimo said.

THR is part of employee earnings that is taxable under PPh Article 21. Based on Government Regulation (PP) No. 58 of 2023, the calculation of tax deductions on THR uses the TER mechanism, divided into three categories: monthly TER A, TER B, and TER C. The groupings are based on the Non-Taxable Income (PTKP) according to the taxpayer’s marital status and number of dependents. The rates for each category range from 0% to 34%, depending on the monthly income.

Rules on THR tax are not set in a single article, but follow the hierarchical order of tax regulations in Indonesia.

There are special provisions for ASN, the TNI and Polri.

Through Government Regulation No. 14 of 2024 and its updates in 2025 and 2026, it is set that Income Tax (PPh) on THR and the 13th salary for ASN is borne by the government. Thus, ASN receive THR in full without personal income tax deductions.