Tax Transformation for Experts: PPh 21 Guide for "Non-Employee" Category

In the new Income Tax (PPh) Article 21 withholding structure effective from January 1, 2024, there is a clear classification regarding who is termed an "Expert." The technical term used in the regulation for this group is Non-Employee (Bukan Pegawai). This group includes experts performing freelance work, consisting of lawyers, accountants, architects, doctors, consultants, notaries, land deed officials, appraisers, and actuaries.

It is important to distinguish this category from "Non-Permanent Employees" (Pegawai Tidak Tetap, such as daily laborers). Experts are not bound by an employment relationship like employees but receive remuneration based on the professional services they provide.

Calculation Mechanism: A Simple Single Formula

One of the most significant changes in the latest regulation (PMK 168 of 2023) is the simplification of the calculation method for Non-Employees. Previously, there were calculation schemes distinguishing between continuous (cumulative) and discontinuous income, as well as the application of Non-Taxable Income (PTKP) deductions for certain conditions. Now, these methods have been removed for administrative simplicity.

Currently, PPh 21 calculation for Experts uses a single formula for each remuneration payment. The formula is:

The calculation steps are:

• Determine Gross Income: This is the total amount of income under any name and in any form received (honorarium, fee, commission, etc.).
• Determine the Tax Imposition Base (DPP): Multiply the Gross Income by 50%.
• Calculate Tax Payable: Multiply the DPP by the Progressive Rate of Article 17 paragraph (1) letter a of the Income Tax Law.

It should be noted that this scheme does not use the Average Effective Rate (TER) commonly used for permanent employees or monthly non-permanent employees. This scheme purely uses the general Article 17 rate.

Case Example 1: Lawyer (Legal Services)

Mr. U is a lawyer handling a legal dispute for PT F. For the settlement of the case, Mr. U receives a fee of Rp400,000,000. The PPh Article 21 calculation to be withheld by PT F is:

• Tax Base (DPP): 50% x Rp200,000,000
• Tax Payable (Article 17 Rate):
  5% x Rp60,000,000 = Rp3,000,000$
  15% x Rp140,000,000 (remaining from 200m - 60m) = Rp21,000,000
  Total PPh 21: Rp3,000,000 + Rp21,000,000 = Rp24,000,000

PT F is required to withhold Rp24,000,000 and provide a withholding slip to Mr. U.

Case Example 2: Doctor (Medical Services in Hospitals)

The calculation for doctors has specific provisions regarding the definition of "Gross Income." Gross income for doctor services in hospitals/clinics is the doctor's fee paid by patients before any deductions for costs or profit-sharing by the hospital.

Mr. R is a pediatrician at ABC Hospital. In January, the total doctor's fees paid by patients amounted to Rp45,000,000. According to the agreement, the hospital deducts a 20% share, so the doctor receives a net 80%. However, the tax is calculated from the full gross amount (Rp45 million).

• Gross Income: Rp45,000,000
• Tax Base (DPP): 50% x Rp45,000,000 = Rp22,500,000
• Tax Payable:
  Since Rp22.5 million is still under Rp60 million (the first tariff bracket), then:
  5% x Rp22,500,000 = Rp1,125,000

The hospital withholds Rp1,125,000 tax from the entitlement to be received by the doctor.

Conclusion

This regulatory change provides certainty for experts. There is no longer confusion regarding continuous status or PTKP deductions in monthly withholding. The key is the consistent application of the 50% rate of gross income as the tax base, which is then subject to the general progressive rate.

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.