BPJS Tax Cycle: Dissecting Rates, Premiums, and Tax Treatment

In Indonesia's employment ecosystem, BPJS (Health and Employment) plays a vital role. However, its tax treatment often causes confusion due to the different treatments between one program and another. The basic principle depends on "when" the tax is imposed: whether when the premium is paid (upfront) or when the benefit is received (later). Furthermore, understanding the premium rates and who bears the burden (employer or employee) is crucial for calculating Take Home Pay and tax payable.

Here is an analysis of Income Tax Article 21 (PPh 21), Corporate Tax aspects, and detailed rates for various BPJS schemes.

1. Group I: BPJS Kesehatan (Health), Work Accident Security (JKK), and Death Security (JKM)

For these three programs, the tax principle is "Tax Now, Exempt Later".

• Rate Details and Burden Sharing:
  • Health Security (BPJS Kesehatan): Total rate 5% of salary.
    • Borne by Employer: 4%
    • Borne by Employee: 1%
  • Work Accident Security (JKK): Rate varies by work risk level (0.24% - 1.74%).
    • Borne by Employer: Fully (e.g., 0.24%)
    • Borne by Employee: -
  • Death Security (JKM): Rate 0.30%.
    • Borne by Employer: Fully (0.30%)
    • Borne by Employee: -
• Tax Aspect At Premium Payment:
  • Paid by Employer: Premiums for Health (4%), JKK, and JKM covered by the employer are recognized as income for the employee (adding to Gross Income) and are subject to PPh 21. For the company, this cost is deductible from gross income.
  • Paid by Employee: Health premiums (1%) deducted from the employee's salary cannot be deducted from gross income when calculating PPh 21.
• Tax Aspect At Benefit Receipt (Claim):
  • Reimbursement of medical expenses, work accident compensation, or death benefits received from BPJS or other insurance are Non-Taxable Objects. The recipient does not need to pay tax again when receiving this compensation or health service.

2. Group II: Old Age Security (JHT) and Pension Security (JP)

For these long-term programs, the tax principle is "Exempt Now, Tax Later".

• Rate Details and Burden Sharing:
  • Old Age Security (JHT): Total rate 5.7%.
    • Borne by Employer: 3.7%
    • Borne by Employee: 2%
  • Pension Security (JP): Total rate 3%.
    • Borne by Employer: 2%
    • Borne by Employee: 1%
• Tax Aspect At Premium Payment:
  • Paid by Employer: JHT (3.7%) and JP (2%) premiums covered by the employer are not income for the employee at that time. Employees are not subject to PPh 21 on this portion. For the company, this cost remains deductible.
  • Paid by Employee: JHT (2%) and JP (1%) premiums deducted from the employee's salary are allowed to be deducted from gross income. This reduces the tax payable by the employee each month.
• Tax Aspect At Benefit Receipt (Withdrawal):
  • When JHT or JP funds are withdrawn, the funds become a Tax Object.
  • If paid as a lump sum, it is subject to Final PPh 21 with special rates (0% up to Rp50 million, 5% above that).
  • If partially withdrawn by an active employee, it is subject to Article 17 rates (progressive).

3. Case Calculation Example

Conclusion

Understanding the separation of these premiums and rates is crucial. A common mistake is for companies to include JHT/Pension premiums paid by the office as employee taxable income, or forget to deduct JHT/Pension premiums paid by the employee from gross income. This can cause employees to pay more tax than they should (overtax).

Regulatory References:

1. Law Number 7 of 2021 concerning Harmonization of Tax Regulations (Elucidation of Article 4 and Article 6).
2. Government Regulation Number 73 of 2016 concerning Income Tax on Social Security Programs Organized by the Social Security Administering Body.
3. Government Regulation Number 68 of 2009 concerning PPh Article 21 Rates on Income in the Form of Severance Pay, Pension Benefits, Old Age Allowances, and Old Age Security Paid as a Lump Sum.
4. 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, Article 7, Article 8).
5. Minister of Finance Regulation Number 247/PMK.03/2008 concerning Aid or Compensation Paid by BPJS to Certain Taxpayers Exempted from Income Tax Objects.