Since the implementation of Government Regulation Number 58 of 2023 (PP 58/2023) and Minister of Finance Regulation Number 168 of 2023 (PMK 168/2023), the Article 21 Income Tax (PPh 21) calculation method has undergone significant changes. From January to November, tax is withheld using the Average Effective Rate (TER). However, in the Last Tax Period (December or the month an employee resigns), the calculation reverts to the progressive Article 17 rate of the Income Tax Law.
This difference in mechanisms often leads to an Overpayment (Lebih Bayar/Lebih Potong) in the Last Tax Period. This means the total tax withheld from January to November (using TER) is higher than the actual tax due for the full year.
Below is an analysis of how to handle this overpayment under three common corporate withholding scenarios.
In this scheme, the company withholds tax directly from the employee's salary. The tax burden lies entirely with the employee.
Mr. A receives a salary of Rp15,000,000/month.
Treatment of Overpayment: Based on regulations, if an overpayment occurs, the Tax Withholder (Company) is required to return the excess to the Permanent Employee. In Mr. A's case, the company must give Rp750,000 in cash/transfer to Mr. A along with the 1721-A1 Withholding Slip. For the company, this amount will reduce the tax deposit for the following tax period.
Since the enactment of the Benefit in Kind regulation (PMK 66/2023), tax borne by the employer is no longer a non-deductible expense. This tax facility is now categorized as a Benefit in Kind (Kenikmatan), which is taxable income for the employee and a deductible expense for the company.
Calculation Mechanism: The tax value paid by the company is added to the employee's gross income as "PPh 21 Benefit".
Mr. B receives a net salary of Rp10,000,000. The company bears the tax.
Treatment of Overpayment: Administratively, the 1721-A1 Withholding Slip will show an Overpayment of Rp300,000. According to PMK 168/2023, the overpayment must be returned to the employee. Legally, the money is the employee's right as recorded in the withholding slip, although companies often account for this refund as an adjustment to avoid double payment.
The company provides a tax allowance calculated mathematically so that the net salary received by the employee remains intact according to the contract. This allowance adds to gross income.
Mr. C receives a salary of Rp20,000,000 + Tax Allowance (grossed-up).
Treatment of Overpayment: Just like other scenarios, the company is required to return the Rp500,000 to Mr. C. Since the tax allowance adds to the gross income as a right, the overpayment legally belongs to the employee.
When the company returns the overwithheld money to employees (e.g., a total of Rp20,000,000 for all employees), the Company's PPh 21 Tax Return for the last tax period will show an Overpayment (LB) status.
For this company Overpayment, the company is entitled to Compensation. Based on the latest regulation PER-11/PJ/2025, this overpayment can be compensated to the following tax period without having to be sequential. For example, an Overpayment in December 2024 can be directly compensated to reduce tax payable in January 2025, February 2025, or any month in the following year.
Regardless of the method (gross, net/natura, or gross-up), if an Overpayment occurs in the Last Tax Period (Form 1721-A1 shows a minus/bracketed figure), the company must return the money to the employee. The company then "reclaims" this money from the state through the compensation mechanism (reducing tax deposits) in subsequent months.
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