Transformation of Article 21 Withholding Tax Calculation Under GR-58/2023 and MoFR-168/2023

TaxPrime Newsletter: GR-58/2023 and MoFR-168/2023

The aim of the transformation of tax rates and calculation mechanisms in Article 21 Withholding Tax under GR-58/2023 and MoFR-168/2023 is to align with the new income tax rates for individual taxpayers and simplify the complexity in the previous withholding tax system. The key changes include the introduction of monthly and daily effective tax rates (ETR) based on non-taxable income status (PTKP) and gross income (without the need to subtract various types of deductions). The regulations also outline tax computation schemes for different income earners, highlighting revisions and their implications. However, the regulations could potentially lead to over-withholding of tax due to the ETR implementation and discuss procedures for refunding excess withheld tax. Additionally, they note the impact on employees’ take-home pay. Overall, the regulations aim to enhance legal certainty, administrative efficiency, and transparency in the Indonesian tax environment.

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