Pph

PPh, short for Pajak Penghasilan, is the Indonesian income tax. It is administered by the Directorate General of Taxes (DJP) and applies to both individuals and entities. The system distinguishes between resident taxpayers, who are taxed on their worldwide income, and non-residents, who are taxed only on Indonesia-sourced income.

Tax is typically collected through withholding by employers and other payers, with the withheld amounts remitted to the tax authority. Taxpayers must obtain an NPWP (Taxpayer Identification Number) and may be required to file an annual income tax return (SPT) to report income, calculate any additional liability, and claim credits for PPh already paid.

PPh comprises several components based on the nature of income and the recipient. PPh Pasal 21 covers employment and payroll-related income, while PPh Pasal 23 applies to certain payments to resident recipients, such as interest, dividends, royalties, and service fees. PPh Pasal 26 is the final withholding tax on payments to non-residents. PPh Pasal 4(2) and PPh Pasal 22 describe other specific scenarios and may involve final taxes or monthly installments (PPh 25). Some income is taxed on a final basis, where the withholding represents the final tax obligation for that income; other items are included in an annual reconciliation through the SPT.

Tax rates and rules can change through tax laws and international treaties, which may affect reliefs and cross-border tax treatment. PPh is separate from other Indonesian taxes, such as value-added tax (VAT).