Post-Employment PPh 21: Taxes on Bonuses Received by Former Employees

Employment relationships may end, but tax obligations can persist. In the corporate world, it is common for an employee who has resigned or retired to receive certain rights from their former company at a later date. These incomes usually take the form of production bonuses (jasa produksi), tantiem (bonuses for directors/ commissioners), gratuities, or annual bonuses that are disbursed after the employee is no longer active.

In PPh Article 21 regulations, these individuals are categorized as Former Employees (Mantan Pegawai). The government, through the latest 2024 regulations, has established a specific withholding mechanism for this category to ensure legal certainty for employers and income recipients.

Calculation Mechanism: Article 17 Rate x Gross Income

Unlike active employees whose monthly income is calculated using the Average Effective Rate (TER), the tax calculation for Former Employees uses the Rate of Article 17 paragraph (1) letter a of the Income Tax Law directly multiplied by the Gross Income.

Key points in this calculation are:

• Tax Imposition Base (DPP): The gross amount of income (production bonuses, tantiem, bonuses, etc.) without deductions for office costs (biaya jabatan) or Non-Taxable Income (PTKP).
• Rate: Uses the general progressive rates (5%, 15%, 25%, etc.).
• Nature: This withholding is non-final, meaning the withholding slip received can be credited in the former employee's Annual Personal Income Tax Return.

Case Example: Mr. O (Receiving Production Bonus)

Let's look at an illustration based on the official Directorate General of Taxes guidelines.

PPh Article 21 Calculation:

Since Mr. O was already a Former Employee when receiving the money, PT L does not use the TER method, but rather the Article 17 Rate multiplied by the Gross amount.

• Gross Income: Rp60,000,000.
• Article 17 Rate (First bracket 5% for 0 to Rp60 million).
• Tax Payable: 5% x Rp60,000,000 = Rp3,000,000

Administrative Obligations

PT L is required to withhold tax of Rp3,000,000 in October 2024 and provide a PPh Article 21 withholding slip to Mr. O. Mr. O is then required to report this income in his Annual Income Tax Return for the 2024 Tax Year, and the tax already withheld by PT L can serve as a tax credit for Mr. O.

Conclusion

Tax withholding for Former Employees focuses on irregular income such as bonuses or tantiem paid after the employment relationship ends. The formula is simple: apply the progressive rate directly to the gross value received.

Regulatory References:

• Minister of Finance Regulation Number 168 of 2023 concerning Implementing Guidelines for Withholding Tax on Income in Connection with Work, Services, or Activities of Individual Taxpayers (Article 5 paragraph 1 letter h, Article 12 paragraph 8, Article 16 paragraph 6).
• Book "Cermat Pemotongan PPh Pasal 21/26" (Directorate General of Taxes, 2024), Page 107.