Income Tax Article 21 (PPh 21) is the tax an employer withholds from salaries and other payments to individuals. Since 1 January 2024, monthly withholding for January to November uses effective rates (TER) under PMK 168/2023, and December is settled with the annual progressive rates.
General information, not tax advice. Positions depend on the facts of each payment and the regulation text in force.
What is Income Tax Article 21 and who must withhold?
PPh 21 is withholding tax on income paid to individuals for work, services or activities, and the payer withholds, deposits and reports it.
Employers, including foreign-owned companies (PT PMA), are the usual withholders for salaried staff. The withholding is a prepayment for the employee: the tax withheld is credited in the employee's annual return. The framework was simplified by Government Regulation 58 of 2023 (PP 58/2023), implemented by Minister of Finance Regulation 168 of 2023 (PMK 168/2023), which applies from 1 January 2024. The official text of PMK 168/2023 is published by DGT, and DGT's own guidance is on its Article 21 page. For the authority behind these rules, see the Directorate General of Taxes in Indonesia.
How does the TER method work?
For January to November, the employer multiplies the month's gross income by the monthly effective rate (TER) that matches the employee's non-taxable income (PTKP) status.
Under PMK 168/2023, the monthly rate tables are split into three categories based on PTKP status at the start of the year:
| Category | PTKP status |
|---|---|
| A | TK/0, TK/1, K/0 |
| B | TK/2, TK/3, K/1, K/2 |
| C | K/3 |
Each category has its own table of income bands, and the rate rises with monthly gross income. The full tables are in the attachment to PMK 168/2023 and should be used directly rather than from secondary summaries. The employer does not compute deductions month by month under TER; that is the simplification.
Worked illustration (arithmetic only): an employee in category A earns Rp10,000,000 gross per month. In DGT's published example for this income level, the applicable TER is 2%, so withholding for each of January to November is 2% × Rp10,000,000 = Rp200,000, or Rp2,200,000 over eleven months. Confirm the band against the current attachment before using any rate in payroll.
What happens in December?
In the final tax period, usually December, the employer calculates annual PPh 21 using the progressive rates in Article 17(1)(a) of the Income Tax Law and deducts what was withheld in January to November.
This true-up is where TER differences surface. If January to November withholding was higher than the annual tax, there is an over-withholding to be dealt with under PMK 168/2023; if lower, December carries the shortfall. Staff who join mid-year, leave early, or receive bonuses and allowances change the outcome, so the December run needs a clean annual computation: gross income, deductible items, PTKP and the tax already withheld. The individual return process then picks up the certificate.
Which certificates and reports apply under Coretax?
Employers issue withholding certificates through Coretax: BPMP for monthly withholding (notification only), BPA1 or BPA2 for the annual or final-period certificate, and BP21 for non-employee payments.
DGT's Coretax guidance states that a certificate must still be issued when income was paid but no PPh 21 was withheld, for example where income is below PTKP or a facility applies, and that BPA1 and BPA2 issued in Coretax are treated as delivered to employees' Coretax accounts and flow into their annual return. A relaxation for the December 2025 monthly return (due date moved from 20 January 2026 to 28 February 2026) was a one-off transitional measure and does not apply to current periods. Deposit is generally due by the 10th and reporting by the 20th of the month following the tax period (PMK 184/PMK.03/2007 as amended, per DGT guidance). Confirm the current Coretax deadlines in DGT announcements.
| Task | Typical timing | Where |
|---|---|---|
| Monthly TER withholding | Each payroll, January to November | Payroll system |
| Deposit | By the 10th of following month | Coretax billing |
| Monthly return | By the 20th of following month | Coretax |
| Annual or final-period certificate | After the final tax period | Coretax (BPA1/BPA2) |
What mistakes should foreign-owned companies avoid?
The most common errors are using the wrong PTKP category, applying TER in December, and failing to issue certificates for nil-withholding employees.
- Setting the PTKP status from payroll records that are out of date at the start of the year.
- Treating TER as the final tax. It is a withholding method; the December computation determines the tax.
- Mixing PPh 21 with payments that belong under other articles. Service payments to companies are generally handled under PPh 23; see Tarif Pajak PPh 23 (Indonesian).
- Not matching payroll to Coretax data, which creates mismatches in employees' annual returns.
- Overlooking identity data. Taxpayer numbers now follow the 16-digit format; see NPWP Online (Indonesian).
A payroll tax review before year-end is an inexpensive control. JCSS Indonesia offers this within its Tax Compliance and Audit Readiness service. For VAT on the same business, see VAT in Indonesia.
Frequently asked questions
Is PP 58/2023 still the basis for PPh 21 TER in 2026?
Yes, as far as our review shows. DGT's Coretax guidance dated January 2026 still refers to PMK 168/2023 and the TER method for January to November. We found no amendment to the TER tables, but you should confirm the current text on DGT's site before running payroll.
Does TER change how much tax an employee pays?
Not in principle. TER changes how tax is withheld during the year, not the annual tax computed in December under Article 17 progressive rates. Monthly withholding can be higher or lower than the final liability, and December adjusts the difference.
Which PTKP categories apply to TER?
Category A covers TK/0, TK/1 and K/0; category B covers TK/2, TK/3, K/1 and K/2; category C covers K/3. The category is set by the employee's PTKP status at the start of the tax year and drives which rate table you use.
Do I need to issue a certificate if no PPh 21 was withheld?
Yes. DGT's Coretax guidance says a certificate must still be issued where income was paid but no tax was withheld, for instance below PTKP or under a facility. This keeps the employee's annual return data complete, and Coretax treats annual certificates issued there as delivered to the employee's own account.
When is PPh 21 deposited and reported?
Under DGT guidance based on PMK 184/PMK.03/2007 as amended, deposit is due by the 10th and the monthly return by the 20th of the following month. Coretax-specific notices and temporary relaxations can change the practical date, so check current DGT announcements.
General information only, not legal or tax advice for your specific facts. Regulations change; confirm the current position with JCSS Indonesia before acting.