The Government Revises Final PPh Regulation to Follow OECD Standards

The government, through the Ministry of Finance (Kemenkeu), is finalizing a Draft Regulation of the Government (“RPP”) on the Amendment to Regulation of the Government No. 55 of 2022 on the Adjustment of Regulations in the Field of Income Tax (“PP 55/2022”). This legal instrument is being prepared to support Indonesia’s membership in the Organisation for Economic Co-operation and Development (OECD).

“One of the key changes aims to refine the provisions related to the adjustment of service types of freelance work whose income is exempted from the imposition of 0.5% final Income Tax (Pajak Penghasilan – “PPh”),” said Yon Arsal, the Expert Staff to the Minister of Finance for Tax Compliance, to Hukumonline.

The changes and exemptions to the 0.5% final PPh subjects, particularly for taxpayers with certain gross turnover, include the removal of specific period for individual taxpayers and certain individual entrepreneur taxpayers. This measure is intended to strengthen the explicit regulation on the prohibition of recognition of bribes and gratuities as a deduction for taxable income.

“It is currently undergoing a harmonization process before being enacted by the President to ensure its effective implementation starting from the 2025 fiscal year,” he added.