New Personal Income Tax Regulations in Indonesia Help Taxpayers Save Money
The Indonesian government recently implemented updated personal progressive income tax regulations on January 1, 2024 to ease the tax payment process for residents of Indonesia. The new system features over 40 specific tax rates tied to precise income ranges and family arrangements. This allows for greater precision and fairness based on an individual’s earnings and expenses.
Key Benefits for Taxpayers
Tax Rates:
There are now over 40 brackets with rates ranging from 0% for those with under 5,400,000 IDR monthly earnings to 34% for the highest earners. In the past, there were only 5 tax brackets, which were as follows:
| Taxable income (IDR) | Old Tax rate (%) |
|---|---|
| Up to IDR 60 million | 5 |
| Above IDR 60 million to IDR 250 million | 15 |
| Above IDR 250 million to IDR 500 million | 25 |
| Above IDR 500 million to IDR 5 billion | 30 |
| Above IDR 5 billion | 35 |
Compared to the previous tiers, the shift to clearly defined income brackets is much more tax payer friendly. For example, if you earn a salary of IDR 26,000,000, the previous tax rate would have been around 25%, whereas according to the new brackets, it works out as just 10%. Please see our ‘Accounting and Tax’ page for a full breakdown of the new tax brackets.
Family Status Considerations:
Tax obligations differ based on household statuses: single, married with no dependents or married with 1-3 dependents.
This benefits larger families with higher costs by adjusting brackets according to needs.
Women are automatically categorized as "single" bracket regardless of real marital or dependents status.
Tax Calculation:
Progressive income tax will normally be withheld from a taxpayer’s monthly salary by an employing company.
Progressive income tax will apply not just to monthly salary but total benefit including salary, bonus, insurance and other allowances.
Challenges for Accounting Professionals:
While the above changes simplify the process for taxpayers and help them save money, more precise brackets require meticulous analysis by accountants. With the prior system of 5 broad rates tied to general income bands, determining the appropriate rate was much more straightforward. Now professionals must comprehensively examine specific earnings down to the rupiah, along with family statuses, to calculate optimal tax liability.
Importance of an Experienced Accountant:
Due to the new changes, partnering with accounting specialists well-versed in nuances of the Indonesian tax code is key for businesses. Our team can provide accounting services and customized solutions based on the new parameters and your unique financial situation. Contact Bali Solve today to discuss your accounting needs and let us help you prepare your 2024 taxes without any stress.