PPh Article 21 Final: Tax Calculation on Severance Pay and Old Age Security (Lump Sum)

In the employment cycle, the end of a service period is often accompanied by a large payment (lump sum) such as Severance Pay (Uang Pesangon), Pension Benefits, Old Age Allowance (THT), or Old Age Security (JHT). Because these funds are received as a lump sum for future security, the government applies a Final PPh Article 21 scheme with special rates that are lighter than regular salary tax rates, provided the payment is made within 2 (two) calendar years.

Two Different Rate Schemes

It is important to distinguish between "Severance Pay" and "Pension Benefits/THT/JHT" because they have different tax brackets.

1. PPh 21 Rates on Severance Pay

Severance pay is income paid by the employer in connection with the end of the working period or termination of employment (PHK). The rates are progressive as follows:

• Gross Income up to Rp50,000,000: 0%
• Above Rp50,000,000 to Rp100,000,000: 5%
• Above Rp100,000,000 to Rp500,000,000: 15%
• Above Rp500,000,000: 25%

2. PPh 21 Rates on Pension Benefits, THT, or JHT

This category covers pension benefits, Old Age Allowance, or Old Age Security paid as a lump sum. The rates are simpler:

• Gross Income up to Rp50,000,000: 0%
• Above Rp50,000,000: 5%

Calculation Examples

Case 1: Severance Pay (Layoff)

Mr. Budi was laid off and received severance pay of Rp175,000,000 paid as a lump sum in January 2024. Tax Calculation:

Case 2: Old Age Security (JHT)

Mrs. Siti retired and withdrew her Old Age Security (JHT) from BPJS Ketenagakerjaan amounting to Rp150,000,000. Tax Calculation:

2-Year Period Provision

The final rates above only apply if the entire payment is made within a maximum of 2 calendar years. If there is a severance/JHT payment in the third year and beyond, the payment in the third year no longer uses the final rate but uses the General Rate of Article 17 of the Income Tax Law and is non-final (can be credited in the Annual Tax Return).

Regulatory References:

1. Government Regulation Number 68 of 2009 concerning Income Tax Article 21 Tariff on Income in the Form of Severance Pay, Pension Benefits, Old Age Allowance, and Old Age Security Paid as a Lump Sum.
2. Minister of Finance Regulation Number 16/PMK.03/2010 concerning Procedures for Withholding Income Tax Article 21 on Income in the Form of Severance Pay, Pension Benefits, Old Age Allowance, and Old Age Security Paid as a Lump Sum.