What are the Income Tax Rates According to the Harmonization of Tax Regulations Law (UU HPP)?

The Indonesian government has raised several income tax (PPh) thresholds, effective from 2022. This is stipulated in the Harmonization of Tax Regulations Law (UU HPP), recently enacted on Thursday, October 7, 2021.

Under these new regulations, income up to IDR 60 million per year is subject to a 5% tax rate. Income between IDR 60 million and IDR 250 million per year is subject to a 15% tax rate.

Income between IDR 250 million and IDR 500 million per year is subject to a 25% tax rate. Income between IDR 500 million and IDR 5 billion per year is subject to a 30% tax rate.

Furthermore, a new tax bracket has been added for high-income earners with income exceeding IDR 5 billion per year. This group is subject to a 35% tax rate.

Under the previous PPh regulations, the 5% tax rate only applied to income up to IDR 50 million. Additionally, there was no fifth tax bracket; all income above IDR 500 million was subject to the same 30% rate.

Despite these stipulated tax rates, personal income tax (PPh) calculations only apply if income exceeds the non-taxable income threshold (PTKP). Therefore, individuals whose monthly or annual income is below the PTKP will not be subject to tax.

The PTKP provisions include: IDR 4.5 million per month or IDR 54 million per year for single individuals; an additional IDR 4.5 million for married individuals; and an additional IDR 4.5 million for each dependent, up to a maximum of three dependents.