A New Era of Remuneration: The Dynamics of Benefit in Kind Tax (Taxable-Deductible)

The landscape of employee income taxation in Indonesia underwent a significant transformation with the enactment of the Harmonization of Tax Regulations Law (UU HPP). The most fundamental change lies in the treatment of non-cash remuneration known as Natura (goods other than money) and Kenikmatan (facilities/services).

Previously, these types of remuneration were generally non-taxable for employees and non-deductible for companies. However, the latest regulations shifted this paradigm to Taxable-Deductible. This means costs incurred by companies to provide benefits in kind/facilities are now deductible in calculating Corporate Income Tax, and conversely, these benefits become taxable income for the receiving employee, subject to Article 21 Income Tax withholding.

Valuation of Natura and Kenikmatan

For fairness, the government established a valuation standard for the tax base:

1. Natura: Valued based on market value (e.g., giving a car or rice).
2. Kenikmatan: Valued based on the actual costs incurred or should have been incurred by the employer (e.g., apartment facilities or official cars).

Exclusions: Non-Taxable Objects (Negative List)

Although the general principle is taxable, the government provides exclusions (Negative List) to maintain basic employee welfare. The following are categories of benefits/facilities excluded from Article 21 Income Tax objects:

1. Food and Beverages for All Employees: Includes food provided at the workplace, or meal coupons for employees working outside the office (such as marketing or transport divisions).
2. Benefits in Specific Areas: Facilities in remote work locations or those with economic potential but limited infrastructure (such as housing, healthcare, and sports in mining/plantation sites).
3. Work Necessities: Facilities that must be provided for security, health, and work safety, such as uniforms (security guards/nurses), personal protective equipment, and employee shuttles.
4. Sourced from State/Regional Budget (APBN/APBD): Benefits financed by the government budget.
5. Certain Types and Limitations: Remuneration with specific values or types deemed reasonable, such as:
   • Religious Holiday Hampers: Excluded for all employees.
   • Other Gifts (Birthday/Appreciation): Excluded up to Rp3,000,000 per year/employee.
   • Sports Facilities: Excluded up to Rp1,500,000 per year/employee (excluding golf, horse racing, power boating, gliding, and automotive sports).
   • Vehicle Facilities: Excluded for non-shareholder employees with an average gross income of up to Rp100,000,000 per month.

Taxable Objects (Subject to PPh 21)

Any form of non-cash remuneration not included in the exclusion list above, or whose value exceeds the established limits, automatically becomes an Article 21 Income Tax object. The tax is applied to the excess value above the limit.

Case Examples and Application

Conclusion

The implementation of the benefit-in-kind tax requires companies to perform more detailed and transparent record-keeping. Companies must separate facilities that are core operational expenses from those that are employee remuneration. For employees, this means higher income transparency, where lifestyle perks funded by the office are now fairly recognized as taxable economic capability.

Regulatory References:

1. Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP).
2. Government Regulation Number 55 of 2022 concerning Adjustments to Regulations in the Field of Income Tax.
3. Minister of Finance Regulation Number 66 of 2023 concerning Income Tax Treatment on Reimbursement or Compensation in Connection with Work or Services Received or Obtained in the Form of In-Kind and/or Benefits.
4. Memorandum of the Director General of Taxes Number ND-14/PJ/PJ.02/2024 concerning Affirmation of the Implementation of PMK 66 of 2023.