Types of work are now more varied as it continues to shift away from the traditional full-time employment as we have known in the past. As a result, many types of income sources can be found in Indonesia. One of the most commonly found occupations in Indonesia is freelancer, freelancing, also known as being self-employed. Freelancers are those with jobs with no employment bound to a company. Based on data collected by Statista, in 2021 there are about 27,23 million freelancers in Indonesia. This number is surely an attention-grabber, especially remembering how Indonesia ranks fourth as the most populated country in the world, with around 275 million people in total.
In response to the many freelancers in Indonesia, the Indonesian government will surely try to impose and withhold tax from income received by these freelancers. However, this goal is proven to be rather difficult. Based on the data provided by the Directorate General of Taxes or DJP, in 2021 the compliance rate from Non-employee Individual Taxpayers only came from 1.85 million taxpayers, whereas in total, these types of taxpayers amount to 4.07 million.
The tax compliance rate from non-employee individual taxpayers itself is only 45.53%. One of the challenges faced by the DJP in implementing and increasing the compliance rate from these taxpayers is related to the Tax Returns (“SPT”) format which is used annually by non-employees. Taxpayers often find the format challenging, as it is rather difficult to simplify the format. This becomes more relatable as we must take into account that taxpayers will provide their own calculations for their annual tax returns.
In terms of tax regulations, following the Directorate General of Taxes Regulation Number PER-16/PJ/2016 regarding the Technical Guidelines for Withholding, Depositing and Reporting of Income Tax Article 21 and/or Income Tax Article 26 in Relation to Employment, Services and Activities of Individuals, freelancers are considered as a non-permanent employee or free labor. This means that the employee will only receive income if said employee is given work, based on the number of working days, the total number of work units produced, or based on the completion of a work given by the employer.
Hence, it becomes important for taxpayers to understand the types of taxes which can be imposed on freelancers. Taxpayers who work freelance can be imposed with Income Tax Article 21/26 on their freelance work. Freelance taxpayers should know that this is the tax that will be imposed on their income from freelance work.
Read more explanation on the imposition of Income Tax Article 21 and Income Tax Article 26 for freelancers.
Income Tax (“PPh”) Article 21
Taxpayers who are Indonesian citizens (“WNI”) or are domestic taxpayers (“WPDN”) are the subject of the imposition of Income Tax Article 21. The taxed object is the income received by taxpayers.
Below is the list of imposition provisions for Income Tax Art. 21 on Freelancers:
Tax Subject | The individual domestic taxpayer who receives income on a project basis; is based on the number of working days, the total number of work units produced, or based on the completion of a work given by the employer. |
Tax Object | Income received and/or obtained by individual domestic taxpayers, in the form of daily payment or monthly-paid payment. |
Tax Base | The tax basis for the imposition of Income Tax Art. 21 on Freelance is:
|
Exemption | For freelancers with a daily wage of no more that IDR450,000, then their income will not be withheld with Income Tax Art. 21 |
Tax Rate | Imposed rate of Income Tax Art. 21 on Non-permanent Employees receiving or obtaining income on a daily basis or not on a monthly basis refers to the applicable Daily Effective Rate as follows:
The applicable tax rate for Income Tax Art. 21 on Non-permanent Employees receiving or obtaining income on a monthly basis refers to the Monthly Effective Rate. |
Income Tax Article 26
Taxpayers that are foreign citizens (“WNA”) or foreign taxpayers (“WPLN”) will be the subject of the imposition of Income Tax Art. 26. The taxed object is the income received by taxpayers.
What considered as foreign taxpayer is foreign citizen that live within the Indonesian territory, for not more than 183 days in the span of 12 months.
Below is the list of imposition provisions for Income Tax Art. 26 on Freelancers:
Tax Subject | Foreign taxpayers who received and/or obtained income from within the Indonesian region, except for Permanent Establishment (“BUT”). |
Tax Object | Income received by foreign taxpayers in the form of payment in relation with occupational services and activities. |
Tax Base | The tax base for income tax art. 26 on Freelance is the gross income. |
Tax Rate | The tax rate for income tax art. 26 imposed on individual foreign taxpayers is 20% or based on the Tax Treaty rate from where they received gross income. |
Calculation Illustration
Illustration 1
Daily gross income of a taxpayer that does not exceed IDR450,000
Ratna is a freelance copywriter at PT MNZ, a multimedia company with a weekly contract where Ratna works for 4 hours per week, with a fee of IDR100,000/hour. Based on this rate, the income that Ratna received daily does not exceed IDR450,000. Ratna’s income as a freelancer is not withheld with Income Tax Article 21.
Illustration 2
A taxpayer receives a daily gross payment exceeding IDR450,000. However, it has not exceeded IDR2,500,000
Clara is a freelance editor at PT. X, receiving a daily payment of Rp500,000. Clara works for 5 (five) days in 1 (one) month, meaning that Clara received an income of Rp2,500,000 for her work.
Based on the received daily gross income of Rp500,000, the imposed Income Tax Art. 21 rate will refer to the applicable Daily Effective Rate of 0.5%.
Thus, Clara’s income tax payable will have the following details:
Income Tax Art. 21 Due = Daily Effective Rate x Daily Gross Income
Income Tax Art. 21 Due = 0.5% x Rp500,000
Income Tax Art. 21 Due = Rp2,500
Illustration 3
Non-permanent Employees receive or obtain a cumulative amount of payment amounting to a gross income of up to Rp2,500,000 daily
Shayla is a freelance graphic designer at PT. O. In July 2024, Shayla worked for 10 (ten) work days, and as payment for her labor, Shayla received an income of Rp4,500,000.
Based on Shayla’s work information, it can be concluded that:
The amount of average daily gross income Shayla received from her graphic design job is Rp4,500,000 : 10 = Rp450,000
Based on the average daily gross income of Rp450,000, the payable Income Tax Art. 21 on income received or obtained by Shayla in one day is calculated using the Daily Effective Rate of 0%.
Based on this information, the withheld income tax calculation is illustrated below:
Income Tax Art. 21 Due = Daily Effective Rate x Daily Gross Income
Income Tax Art. 21 Due = 0% x Rp450,000
Income Tax Art. 21 Due = Rp0
Illustration 4
Non-permanent Employees receive or obtain a cumulative amount of payment amounting to a gross income of more than Rp2,500,000 daily
Meriam works at PT. MN to conduct material checking work for 5 (five) days. As payment for her labor, Meriam received an income amounting to Rp15,000,000.
Based on Meriam’s work information, it can be concluded that:
The amount of average daily gross income Meriam received from her job is Rp15,000,000 : 5 = Rp3,000,000
Based on the average daily gross income of Rp3,000,000, the payable Income Tax Art. 21 on income received or obtained by Meriam is calculated using the rate on Article 17 of Income Tax Law, where the applicable rate is 50% of the average daily gross income.
Based on this information, the withheld income tax calculation is illustrated below:
Income Tax Art. 21 Due = Art. 17 Income Tax Law x 50% x Daily Gross Income
Income Tax Art. 21 Due = 5% x 50% x Rp3,000,000
Income Tax Art. 21 Due = Rp75,000
Illustration 5
Non-permanent Employees receiving or obtaining unit payment with a gross income amount exceeding Rp2,500,000 daily
Selvi works at PT YZ as a freelance web designer with a daily income determined from the amount of web design Selvi produces, valued at Rp400,000 per design. Selvi finished 10 (ten) web designs for PT YZ in one day and received an income of Rp4,000,000.
Based on the daily gross income of Rp4,000,000 Selvi received, the amount of payable Income Tax Art. 21 is calculated using the rate on Article 17 of Income Tax Law times 50% of the daily gross income amount.
Based on this information, the withheld income tax calculation is illustrated below:
Income Tax Art. 21 Due = Art. 17 Income Tax Law x 50% x Daily Gross Income
Income Tax Art. 21 Due = 5% x 50% x R43,000,000
Income Tax Art. 21 Due = Rp100,000
Illustration 6
Non-permanent Employees receiving or obtaining a monthly income
Shakira (TK/0) works as a harvester at a plantation owned by PT ABC where Shakira receives a monthly income based on the collected harvested goods. Throughout 2024, Shakira receives income in the following amounts:
Month | Income Received (Rp) |
January | 4,000,000 |
February | 7,000,000 |
March | 1,000,000 |
April | 7,000,000 |
May | 8,000,000 |
June | 6,000,000 |
July | 7,000,000 |
August | 8,000,000 |
September | 6,000,000 |
October | 9,000,000 |
November | 2,000,000 |
December | 8,000,000 |
Total | 73,000,000 |
Based on the Non-taxable Income status that Shakira has (TK/0), the amount of payable Income Tax Art. 21 on income received or obtained is calculated using the Monthly Effective Rate Category A, as regulated in the Government Regulations No. 58 Year 2023.
Thus, the amount of withheld income tax calculation is illustrated below:
Month | Income Received (Rp) | Monthly Effective Rate Category A | Income Tax Art. 21 (Rp) |
January | 4,000,000 | 0% | 0 |
February | 7,000,000 | 1,25% | 87,500 |
March | 1,000,000 | 0% | 0 |
April | 7,000,000 | 1,25% | 87,500 |
May | 8,000,000 | 1,5% | 120,000 |
June | 6,000,000 | 0,75% | 45,000 |
July | 7,000,000 | 1,25% | 87,500 |
August | 8,000,000 | 1,5% | 120,000 |
September | 6,000,000 | 0,75% | 45,000 |
October | 9,000,000 | 1,75% | 157,500 |
November | 2,000,000 | 0% | 0 |
December | 8,000,000 | 1,5% | 120,000 |
Total | 73,000,000 | 870,000 |
Income Tax Article 26
A foreign taxpayer works as a freelancer in Indonesia and has received income given by an Indonesia-based company for their services. This freelancer receives a gross income of IDR200,000,000 in a year as payment for their services in video editing.
Based on this information, the withheld income tax calculation is illustrated below:
Taxable Income = IDR200,000,000
The details for their income tax withheld are as follows:
Income Tax Art. 26 Due = 20% x Taxable Income
= 20% x IDR200,000,000
= IDR40,000,000
Legal Basis
Government Regulation Number 58 Year 2023 on Income Tax Article 21 Withholding Tax Rates In Connection With Employment, Services, or Activities of Individual Taxpayers
Ministry of Finance Regulation Number 168 Year 2023 on Implementing Guidelines For Withholding Tax On Income In Relation To Work, Services, Or Activities Of Individuals
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