Regulation Update
New Regulation Issued, Check Out the List of Benefits in Kind Exempted from Income Tax

Tuesday, 27 December 2022

New Regulation Issued, Check Out the List of Benefits in Kind Exempted from Income Tax
Ilustrasi natura dalam bentuk makanan dan/atau fasilitas perusahaan yang dikecualikan dari pengenaan PPh (Photo: Towfiqu Barbhuiya/Pexels)

The government emphasizes the types of compensation in benefit in kind that are subject to or exempted from the imposition of income tax.

This is contained in Government Regulation (PP) Number 55 of 2022 concerning Adjustments to Regulations in the Income Tax, which has been effective since promulgation on 20 December 2022.This regulation is one of the implementing regulations of the Law on the Harmonization of Tax Regulations (HPP) which revised the Tax Law.

There are two definitions of compensation regulated in Government Regulation Number 55 of 2022. First, compensation in benefit in kind is compensation in the form of goods other than money. In this case what is meant by money also includes checks, savings balances, electronic money, or digital wallet balances.

Second, compensation in the form of benefit is compensation in the form of the right to use a facility and/or service. Facilities and/or services provided by the provider to the recipient may originate from the provider's assets or third party assets that are leased and/or financed by the provider.

In general, the government stipulates that reimbursement or compensation in benefit in kind and/or benefit is the object of income tax or is subject to tax.

As for reimbursement costs or rewards—provided in the form of benefit in kind—in respect of work or services, they are deductible from gross income. This is related to the calculation of taxable income by the employer or the benefit in kind provider. With a note, as long as the calculation of the cost of reimbursement or such rewards to obtain, collect, and maintain income.

Types of Benefit in Kind That are not Income Tax Objects

However, the government through Government Regulation Number 55 of 2022 makes certain exceptions in benefit in kind from income tax objects.  Following are details of compensation or rewards in benefit in kind that are exempted from the imposition of Income Tax:

No Types of Compensation Details of Benefit in Kind
1 Food, food ingredients, beverage ingredients, and/or beverages for all employees;
  • food and/or drinks provided by the employer at the workplace;

  • food and/or drink coupons for employees who due to their work cannot take advantage of the provision of food and/or drinks as referred to in letter a, include employees in the marketing department, transportation department and other external services;  and/or food and/or
  • beverage ingredients for all employees with a certain value limit.
2 Benefit in kind provided in certain areas based on a determination from the DGT includes facilities, infrastructure and/or facilities at work locations for employees and their families;
 
  • residence, including housing

  • health services;

  • education;

  • worship;

  • transportation in order to carry out the assignment;  and,

  • sport does not include golf, motorized boat racing, horse racing, gliding, or motor sports

3 Benefit in kind that must be provided by the employer in carrying out work in connection with requirements regarding security, health and/or safety of employees required by ministries or agencies based on provisions of laws and regulations;
  • uniform
  • equipment for work safety
  • employee shuttle service
  • lodging for crew members and the like;  and
  • benefits in kind received in the context of handling endemic, pandemic or national disasters, for example: pandemic virus detection kits and/or vaccines and their supporting facilities.  (*Must be based on the provisions of the Ministry of Health)
     
4 Benefit in kind received in the context of handling endemic, pandemic or national disasters, for example: pandemic virus detection kits and/or vaccines and their supporting facilities.  
5 Benefit in kind with certain types and/or limitations.

For example: holiday gifts or worship facilities at work sites that are used by all employees.

*) The amount, form and other types will be regulated in the PMK

The exception of income tax objects for benefits in kind with certain types/limits and benefits in kind in the form of food/beverages for all employees, considers the following two things:

  • type and/or value of compensation or benefit in kind received;  and/or
  • criteria for receiving compensation or benefit in kind

Basis for Determining Value

In determining the value of compensation or reward in the form of benefit in kind refers to the following provisions:

  • Benefit in kind based on market value.
  • Benefit in kind based on the amount of costs incurred or should have been issued by the employer.

Withholding Income Tax

Apart from those benefits excluded, other benefits in kind are the object of income tax.  For this reason, the government through Government Regulation Number 55 of 2022 also stipulates terms and conditions for withholding income tax on benefit in kind.

First, employers are required to withhold income tax on benefits in-kind income provided since 1 January 2023.

Second, if the benefits in-kind given in 2022 has not been withheld by the employer, then the income tax payable must be calculated and paid and also reported by the employees themselves in the 2022 Individual Income Tax Return.

Third, withholding income tax on benefits in kind for the 2022 tax year for employers who keep the books of accounts for the 2022 financial year before 1 January 2022 (for instance, the accounting period starts on 1 October 2021 and ends on 30 September 2022) then the following conditions apply:

Benefit in Kind Granting Period

Employer

Employee

Imposition

Withholding Tax

1 October - 31 December 2021

Non- deductible expense

-

Not an Income Tax object 

1 January- 31 December 2022

Deductible expense

If making withholding 

Income tax object and reported in an individual tax return

Deductible expense

If not making withholding

Income tax object, the calculation and payment of the payable income tax is carried out by the employees themselves when reporting it is reported in the individual income tax return.

Mulai 1 January 2023

Deductible expense

Required to make withholding income tax 

Income tax object and reported in individual income tax return

Fourth, withholding income tax on benefit in kind for the 2022 tax year for employers who keep the books of accounts for the 2022 financial year starting on 1 January 2022 and thereafter (for example the accounting period starts on 1 April 2022 and ends on 31 March 2023) then the following provisions apply:

Benefit in Kind Granting Period

Employer

Employee

Imposition

Withholding Tax

Before 1 April 2022

Non- deductible expense

-

Not an income tax

1 April 2022 - 31 March 2023

 

Deductible expense

If making the withholding

Income tax object and reported in individual income tax return

Deductible expense

If not making the withholding

The income tax object, the calculation and payment of the income tax payable is carried out by the employees themselves when it is reported in the individual income tax return

Mulai 1 April 2023

Deductible expense

Required to make withholding income tax

Income tax object and reported in individual income tax return

For more details regarding the income tax provisions for benefits in kind, see Government Regulation Number 55 of 2022. (CHY/SYF/ASP/KEN)
 

Peraturan Pemerintah (PP) Nomor 55 tahun 2022

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