Learn how Potongan Pajak THR works in Indonesia, including PPh 21 calculation, PTKP thresholds, PMK 168 and PP 58 rules, and employer withholding obligations before the religious holiday deadline.
As Indonesia approaches its annual religious festive season, companies across the country prepare to distribute Tunjangan Hari Raya (THR), the mandatory Religious Holiday Allowance. While THR is widely understood as a labour entitlement, it also carries tax consequences that employers and employees must recognise.
A common question arises each year: Is THR subject to tax? The short answer is yes.
Is THR Taxable?
THR constitutes taxable income under Indonesian tax law. It is categorised as additional income received by employees and therefore falls within the scope of Pajak Penghasilan Pasal 21 (PPh 21).
Under regulations issued by the Ministry of Manpower, THR must be paid either in full or proportionally based on length of service, and no later than seven days before the relevant religious holiday.
THR must be granted to employees who have:
- Worked continuously for at least one month;
- Been employed under either Perjanjian Kerja Waktu Tidak Tertentu (PKWTT) or Perjanjian Kerja Waktu Tertentu (PKWT);
- Met eligibility requirements under prevailing labour regulations, including certain freelance workers who qualify under employment criteria.
While labour law governs payment obligations, tax law governs its fiscal treatment.
Type of Tax Imposed on THR
The tax imposed on THR is PPh Pasal 21, the income tax applicable to employment income.
Under the Income Tax Law, THR is treated as non-regular income that is inseparable from an employee’s annual income. As such, the tax on THR is calculated by aggregating the THR amount with the employee’s total annual income.
Employers are required to withhold PPh 21 at source. Employees receive THR net of tax deduction.
Legal Basis for THR Taxation
The legal framework regulating THR taxation includes:
- Law No. 36 of 2008 on Income Tax, particularly Article 21, which governs withholding on employment income, including non-recurring income such as THR.
- Law No. 7 of 2021 on Harmonisation of Tax Regulations (HPP), which updated progressive income tax rates affecting THR calculation.
- Minister of Finance Regulation (PMK) No. 168/PMK.03/2023, providing technical guidance on the calculation and withholding of PPh Pasal 21, including additional income such as THR.
- Government Regulation No. 58 of 2023, regulating withholding rates under PPh 21 for income derived from employment or services.
These regulations clarify that THR is subject to progressive tax rates based on taxable income.
Mechanism of THR Tax Deduction
Under PER-16/PJ/2016, employers are responsible for withholding PPh 21 on both regular and irregular income.
Parties classified as employers include:
- Individuals;
- Legal entities;
- Branch offices, representative offices, or business units.
Certain entities are exempt from withholding obligations, including:
- Foreign diplomatic missions;
- International organisations not subject to Indonesian income tax under specific PMK provisions;
- International organisations governed by international agreements;
- Individuals employing domestic workers are not engaged in business or independent professional activities.
For most private companies, however, withholding is mandatory.
How Much Is THR Tax?
THR becomes taxable if total irregular income, combined with annual income, exceeds the Penghasilan Tidak Kena Pajak (PTKP) threshold, currently equivalent to Rp54 million annually (or Rp4.5 million per month for baseline calculation purposes).
If an employee’s total annual net income, including THR, remains below PTKP, no income tax is imposed.
If income exceeds PTKP, the progressive tax rates under Article 17 of the Income Tax Law apply. These rates range from 5% to 35%, depending on income brackets, and may also be influenced by the PPh 21 TER (Tarif Efektif Rata-rata) mechanism.
Components Required to Calculate THR Tax
To calculate tax on THR, the following elements are required:
- Total THR amount received;
- Monthly and annual income;
- Marital status;
- Number of dependents;
- Deductible components such as job expense deduction (biaya jabatan) and pension contributions.
The calculation follows a structured approach consistent with annual PPh 21 computation.
Step-by-Step Calculation of THR Tax
- Determine total gross income for the year, including THR.
- Calculate PTKP based on marital status and dependents.
- Deduct biaya jabatan (maximum 5% of gross income, capped at Rp6 million annually).
- Determine Penghasilan Kena Pajak (PKP).
- Apply progressive tax rates under Article 17.
- Allocate tax proportionally to determine the tax attributable to THR.
Example Calculation
Consider Mr A, employed at PT BBB:
- Status: Married without dependents (K/0)
- Monthly salary: Rp15,000,000
- THR received: Rp15,000,000
- PTKP (K/0): Rp58,500,000
Step 1: Annual Income
Annual salary (excluding THR):
Rp15,000,000 × 12 = Rp180,000,000
Total gross income (including THR):
Rp180,000,000 + Rp15,000,000 = Rp195,000,000
Step 2: Deduct Job Expense (Biaya Jabatan)
5% of Rp195,000,000 = Rp9,750,000
However, capped at Rp6,000,000.
Recognised deduction: Rp6,000,000
Adjusted gross income:
Rp195,000,000 − Rp6,000,000 = Rp189,000,000
Step 3: Deduct PTKP
Rp189,000,000 − Rp58,500,000 = Rp130,500,000
This becomes PKP.
Step 4: Apply Progressive Rates
- First Rp60,000,000 × 5% = Rp3,000,000
- Remaining Rp70,500,000 × 15% = Rp10,575,000
Total annual PPh 21:
Rp13,575,000
Step 5: Allocate Proportional Tax to THR
THR proportion:
Rp15,000,000 ÷ Rp195,000,000 × Rp13,575,000
= Rp1,044,231
Final THR received after tax:
Rp15,000,000 − Rp1,044,231 = Rp13,955,769
This proportional method ensures equitable tax allocation.
Practical Tips for Calculating THR Tax
- Use official PPh 21 calculators to avoid computational errors.
- Verify income documentation to ensure accurate data.
- Coordinate with HR or tax consultants for compliance.
- Confirm PTKP status before calculation.
How to Deposit THR Tax Withholding
Employers must deposit withheld PPh 21 to the state treasury through e-Billing systems.
The process typically involves:
- Logging into the tax platform.
- Selecting the appropriate tax code (KAP 411121 – PPh Pasal 21).
- Generating an ID Billing.
- Completing payment via authorised banking channels.
- Confirming payment and retaining proof of deposit (NTPN).
Timely payment is critical to avoid penalties.
Conclusion
THR is both a labour right and a taxable income component under Indonesian law.
It is subject to PPh 21, calculated using progressive tax rates and considering PTKP and allowable deductions such as biaya jabatan.
The calculation process involves aggregating THR with annual income, applying deductions, and allocating tax proportionally.
For employers, compliance requires proper withholding, deposit, and reporting. For employees, understanding how THR is taxed ensures transparency.
In Indonesia’s evolving regulatory landscape, accurate THR taxation remains a key compliance checkpoint during the religious holiday season.
Tax Reporting in Indonesia with Lets Move Indonesia
Beyond calculation and withholding, employers must also ensure accurate reporting of PPh 21 through monthly and annual filings.
In Indonesia’s increasingly digital tax environment, governed by updated PMK, PP, and technical regulations such as PMK 168, compliance requires precision in payroll integration, tax deduction, deposit, and reporting.
For companies navigating PPh 21, PPh 26, THR calculations, and broader tax reporting obligations, professional guidance can reduce risk and administrative burden.
Lets Move Indonesia provides structured tax advisory and reporting assistance, ensuring compliance with Indonesian tax regulations while supporting operational efficiency.
Contact Lets Move Indonesia and speak with our consultant for integrated Indonesia Tax & Accountancy Support.
