The new year 2024 begins with the implementation of the use of the average effective rate, or often called TER. The TER scheme is used to calculate the amount of Income Tax Article 21 (PPh 21), which is a type of tax imposed on employees.

TER policy is regulated in Government Regulation Number 58 of 2023 (PP 58/2023). These regulations were stipulated on December 27 2023, however, the issue of changing the calculation of PPh 21 using the TER scheme has emerged since the beginning of 2023.

Why was the PPh 21 calculation policy changed?

The calculation of PPh 21 was changed not without reason. The government explained that one of the reasons for changing the PPh 21 calculation scheme is because currently the PPh 21 withholding calculation has various calculation schemes which can confuse taxpayers. Apart from that, the many tax administration schemes for calculating PPh 21 are burdensome for taxpayers.

There are at least three objectives for changing the calculation of PPh 21, namely:

1. Provides convenience and simplicity for Taxpayers to calculate Article 21 Income Tax deductions in each Tax Period
2. Increase taxpayer compliance in carrying out their tax obligations
3. Provides convenience in building a tax administration system that is capable of validating taxpayer calculations.

TER Applies: Are There Any New Taxes Emerging?

TER is a scheme for calculating PPh 21, not a new type of tax. Thus, there are no new types of taxes arising as a result of the enactment of TER provisions. The TER scheme is only used for other than the last tax period.

If the company uses the financial year January to December, then the calculation of PPh 21 is carried out using the TER scheme for January to November, while the calculation of PPh 21 is carried out using the rates of Article 17 paragraph (1) letter a of the Income Tax Law. The rates for Article 17 of the Income Tax Law and TER are used to deduct Article 21 Income Tax for Individual Taxpayers (WPOP) who receive income in connection with work, services or activities, including state officials, civil servants, Indonesian National Armed Force (TNI), police and retirees.

Get to know TER PPh 21

TER consists of effective monthly rates and daily rates.

1. Effective Monthly Rate

The effective monthly rate is determined based on Non-Taxable Income (PTKP). There are three categories for monthly rates, namely categories A, B, and C. The PTKP details for each category are as follows:

• Category A (TER A) is TK/0 (with PTKP IDR 54 million) and TK/1 and K/0 (with PTKP IDR 58.5 million)
• Category B (TER B) namely TK/2 and K/1 (with PTKP IDR 63 million) and TK/3 and K/2 (with PTKP IDR 67.5 million)
• Category C (TER C) is K/3 (with PTKP IDR 72 million)

The effective monthly rate varies between categories. However, in general, the effective monthly rate ranges from 0%-34% per month. The number of layers for TER A is 44 layers, TER B 40 layers, and TER C 41 layers.

2. Daily Effective Rate

The daily rate is determined based on the amount of daily gross income. Daily gross income which is the basis for the imposition of PPh 21 with the TER scheme is the income of non-permanent employees received daily, weekly, individually or in pieces. In the event that income is not received daily, TER is multiplied by the average amount of daily income (average weekly wages, piece, wholesale, for each working day used).

The daily effective rate (Daily TER) is divided into two, namely 0% and 0.5%. The 0% rate is used if the daily gross income is a maximum of IDR 450 thousand, while the 0.5% rate is used if the daily gross income is more than IDR 450 thousand to IDR 2.5 million.

How to Calculate PPh 21 Using TER

In simple terms, the application of the TER policy to calculate PPh 21 for permanent employees is as follows:

• The TER calculation per month for January-November is equal to

= Gross income x TER

The amount of gross monthly income that is the basis for calculating the monthly TER is the income received by the WPOP in one tax period. The amount of TER is determined based on PTKP

• The TER calculation for December 2024 is equal to

= Actual income January-December x Rate Article 17(1) letter a Income Tax Law

The calculation of PPh 21 in December is carried out by considering the actual amount of income. Apart from that, the rate used is the rate of Article 17 of the Income Tax Law. Apart from that, the calculation still refers to PER 16/2016. After the calculation of PPh 21 for the year is known, the amount of PPh 21 for the December period is calculated as follows:

= PPh 21 a year calculated at the rate of Article 17 of the Income Tax Law - PPh that has been paid January-November which is calculated using the Monthly TER.

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