PPh 21 Calculation Dynamics When an Employee Resigns: Potential Overpayment and Employer Obligations

In the employee tax administration cycle, the moment a permanent employee decides to resign in the middle of the year is a critical one. Since the implementation of the Average Effective Rate (TER) mechanism on January 1, 2024, the tax calculation in the employee's final working month (Last Tax Period) determines whether the employee has an underpayment or an overpayment that must be refunded by the company.

Shift in Method: From TER Back to Article 17

For permanent employees who work from January but stop before December (e.g., resign in August), the tax withholding method is divided into two phases:

• January to Month Before Resignation: Withholding is done using the Monthly Effective Rate (TER) multiplied by the monthly Gross Income.
• Last Tax Period (Resignation Month): Withholding is recalculated using the progressive rates of Article 17 of the Income Tax Law.

In this last tax period, the employer is required to recalculate the total income received by the employee from the beginning of the year until the month they stop, calculate the actual tax payable, and compare it with the tax already withheld via the TER scheme in the previous months.

Final Calculation Mechanism

The calculation steps in the month the employee resigns are as follows:

1. Calculate Total Gross Income: Sum of salary, allowances, THR, and bonuses received from January to the resignation month.
2. Calculate Deductions: Calculate Office Costs (Biaya Jabatan) (5% of gross, max Rp500,000 per month multiplied by the number of months worked) and pension contributions paid by the employee.
3. Determine Net Income: Gross Income minus Deductions.
4. Calculate Taxable Income (PKP): Net Income minus Non-Taxable Income (PTKP) for the full year.
5. Calculate Tax Payable: Multiply PKP by Article 17 rates.
6. Compare: Subtract the actual Tax Payable by the total tax already withheld using TER in the previous months.

Case Example: Mr. D (Resigns in August)

Mr. D (Status TK/0 - Single, no dependents) works at PT W with a salary of Rp17,500,000 per month. He pays pension contributions of Rp100,000 per month. Mr. D resigns on August 1, 2024.

A. Withholding January – July (Using TER)

Based on TK/0 status and Rp17,500,000 salary, Mr. D falls into TER Category A with an 8% rate.

• • Monthly PPh 21: $8\% \times Rp17,500,000 = Rp1,400,000$
• • Total withheld (Jan–July): $7 \text{ months} \times Rp1,400,000 = Rp9,800,000$

B. Last Tax Period Calculation (August)

• • Gross Income (Jan-Aug): $8 \text{ months} \times Rp17,500,000 = Rp140,000,000$
• • Deductions:
   
• • Office Costs: 5% x Rp140,000,000 = Rp7,000,000 (Max allowed is 8 x Rp500,000 = Rp4,000,000).
  • Pension Contributions: 8 x Rp100,000 = Rp800,000.
  • Total Deductions = Rp4,800,000.
• • Net Income: $Rp140,000,000 - Rp4,800,000 = Rp135,200,000$
• • Taxable Income (PKP): $Rp135,200,000 - Rp54,000,000 \text{ (PTKP TK/0)} = Rp81,200,000$
• • PPh 21 Payable (Article 17 Rate):
  5% x Rp60,000,000 = Rp3,000,000
• • 15% x Rp21,200,000 = Rp3,180,000
  • Total Actual Tax = Rp6,180,000.

C. Final Status

Conclusion

In this case, PT W does not withhold tax from the August salary. Instead, PT W is obliged to refund Rp3,620,000 to Mr. D. This refund must be made no later than the end of the month following the resignation. Mr. D will then receive a 1721-A1 Withholding Slip showing this status for his Annual Tax Return reporting.

Regulatory References:

• Government Regulation Number 58 of 2023 concerning Article 21 Income Tax Withholding Rates on Income in Connection with Work, Services, or Activities of Individual Taxpayers.
• 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.
• Book "Cermat Pemotongan PPh Pasal 21/26" (Directorate General of Taxes, 2024).