Good news! The government will once again provide wage subsidies. This time, the subsidies are given to Indonesian workers with a maximum salary of IDR 3.5 million per month. As early as this week, 16 million workers are expected to receive subsidies.
According to detikjatim, Indonesian Finance Minister, Sri Mulyani, stated that the wage subsidies are provided in accordance with President Joko Widodo's instructions. Total budget prepared for the wage subsidies is IDR 9.6 trillion. Each worker will receive IDR 600 thousand in wage subsidy. Technical instructions for the disbursement of wage subsidies will be issued by the Minister of Manpower, Ida Fauziah, as the basis for the distribution of these subsidies.
On the same occasion, Sri Mulyani stated that wage subsidies were provided to workers in an effort to mitigate the impact of inflation and reduce poverty. Will the receipt of this subsidy then be taxed?
Based on Article 4 paragraph (1) of the Income Tax Law, The object of income tax is any increase in economic capacity received by or accrued by a taxpayer from Indonesia as well as from offshore, which may be utilized for consumption or increasing the taxpayer’s wealth. This term includes salaries, wages, allowances, honorarium, commissions, bonuses, gratuities, pensions, or other forms of compensation.
However, not all income received by workers will be tax deductible. Article 7 paragraph (1) of the Income Tax Law regulates the exemption on income from tax. The amount of exemption per year is IDR 54 million for individual taxpayers. If the worker is married and has dependents, the exemption amount will be increased.
Thus, income subsidies provided to workers earning up to IDR 3.5 million per month are not deducted from income tax because the total amount of income plus the wage subsidy received is under the individual exemption. The formulas are as follows:
| Total salary + subsidy per month | IDR3,500,000 + IDR600,000 | IDR4,100,000 |
| Total salary + subsidy per year | IDR4,100,000 x 12 | IDR49,200,000 |
| Individual Taxpayer exemption per year | (IDR54,000,000) | |
| Taxable income | Nil |
Taxable Income is nil. There is no income tax imposed on the taxpayer because the annual income is below the annual individual exemption.
