Regulation Update
The Imposition of Final Income Tax on Construction Services is Valid for Three Years

Friday, 25 February 2022

The Imposition of Final Income Tax on Construction Services is Valid for Three Years

The certainty of imposition of final Income Tax (PPh) for the construction services sector will only be valid for three tax years. Because, in the third tax year, the government will evaluate its sustainability afterward.

If the evaluation results state that the final income tax for construction services is not in accordance with the principles of justice and equality, then the imposition of income tax can refer to the general provisions, namely Article 17 of the Income Tax Law.

The evaluation will be carried out three tax years after the government issues Government Regulation (PP) Number 9 of 2022, on 21 February 2022.

The regulation is an amendment to Government Regulation Number 51 of 2008 which was last amended by Government Regulation Number 40 of 2009 concerning Income Tax on income from the construction service business.

Previously, the imposition of the final income tax for income earned from construction services sector was carried out to make it easier for business actors to perform their tax obligations.

This means that in these three tax years, taxpayers are still entitled to final income tax. However, there are some other adjustments that are set in the latest regulation.

Service Classification Clarified

In the latest regulation, the government clarifies and expands the scope of construction service business activities that can use the final income tax calculation.

Previously, what was included as a construction service business was divided into construction planning consulting services, construction work, and construction work supervision consulting services.

However, in the latest regulation, the government changed its classification into consulting services, construction work services and integrated construction work services or a combination of consulting and work.

For supervision services previously set in separate groups included in construction consulting services.

Thus, the classification of consulting services business according to the latest provisions becomes:

Construction Consulting Services Construction Work Services Integrated Construction Services
  • assessment
  • planning
  • designing
  • supervision
  • construction management
  • development
  • operation
  • maintenance
  • demolition
  • rebuilding


  • integration of planning, procurement and development functions
  • combination of planning and development 


Rates Lowered

The change in the group of service providers has an impact on the composition of the final income tax rate. Among other things, related to the addition of business classifications for integrated construction services, this has an impact on the provisions of the final income rate imposed.

In addition, the government also cut the final income tax rate imposed on construction service providers with small business entity certificates from the previous 2% to 1.75%.

In general, here are the differences in the final income rate of construction services between the old and new rules:


Types of Services

Old Tariff

New Tariff


Construction work by certified individual service providers or small businesses.




Construction work by non-certified business entities or individuals




Construction work other than in number 1 and 2




Integrated construction works by certified service providers




Integrated construction work by non-certified service providers




Construction consulting services by a certified service provider




Construction consulting services by non-certified service providers



Final income tax payments can be made in two ways. First, it is deducted directly if the service user is a tax withholder. Second, final income tax can be paid by the service provider themselves if the service users are not tax withholding agents.

The final income tax withheld or paid does not include Value Added Tax (VAT).

Transition Terms

Tariffs and all provisions stipulated in the latest Government Regulation Number 9 of 2022 only apply to contract payments made after the regulation is enacted. For service payments for contracts made before that period, it still refers to the old provisions.

Meanwhile, all derivative regulations can still apply as long as they do not conflict with the latest regulations.

In their explanation, the government said that the imposition of final income tax is expected to encourage business activities in the construction services sector.
Moreover, the construction sector plays an important role in creating jobs, encouraging investment, and supporting the mobility of goods and services.


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