Regulation Update
Armed with The HPP Law, The Government Starts To Tax Benefit in Kind in 2022

Friday, 05 November 2021

Armed with The HPP Law, The Government Starts To Tax Benefit in Kind in 2022

With the Harmonized Tax Law (HPP law), starting in 2022, the government will tax Benefit In Kind (BIK) that companies usually provide to employees—including those received by directors and commissioners.

BIK or benefit is an additional economic capability that is received not in the form of money, but in the form of goods. For example, compensation in the form of rice or other foodstuffs, company car, transportation, residential accommodation or housing facility.

This policy is an implication of the issuance of Law Number 7 of 2021 concerning Harmonized Tax Law (UU HPP), which among other things revises a number of articles related to tax objects in the Income Tax (PPh) Law.

There is an amendment in Article 4 paragraph (1) letter a of the Income Tax Law related to BIKs and/or benefits, which previously was not a tax object to become a tax object for the recipient.

Previously, reimbursement or benefits related to work categorized as taxable income included salaries, wages, allowances, honoraria, commissions, bonuses, gratuities, pensions, or other forms of reimbursement. Starting in 2022, it will be added with BIKs and/or benefits.

However, not all types of BIK or enjoyment will be taxed. In the revision of Article 4 paragraph 3 letter d of the Income Tax Law, it is stated that BIKs or benefits that is excluded from the tax object includes:

  1. food, food ingredients, beverage ingredients, and/or beverages for all employees;
  2. BIKs and/or benefits provided in certain regions;
  3. BIKs and/or benefits that must be provided by the employer related to the performance of work;
  4. BIKs and/or benefits sourced or financed by the State Budget (APBN), Regional Budget (APBD), and/or Village Revenue and Expenditure Budget ( APBNDesa); or
  5. BIKs and/or benefits with certain types and/or limitations.


By being designated as a tax object, BIKs will be calculated as additional employee income which is the basis for withholding Income Tax Article (ITA) 21 by the company.

Automatically, the tax burden borne by employees is likely to be greater than before—which does not take into account BIKs as tax objects.

While administratively, the company needs to consider BIKs and take it into account one by one into the component of employee income that will be deducted from ITA 21

However, there are additional provisions related to BIKs in Article 6 paragraph (1) letter n of the Income Tax Law. In this case, BIK that is the object of tax can become a deductible expense for the company.

Undang-Undang Nomor 7 Tahun 2021 tentang Harmonisasi Peraturan Perpajakan (UU HPP)


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