Government-Borne Article 21 Income Tax Incentive for Fiscal Year 2025 as an Economic Stimulus

The Government of Indonesia has reintroduced an economic stimulus policy for Fiscal Year 2025 through the provision of tax incentives. This policy was initially enacted on 4 February 2025 through Minister of Finance Regulation (PMK) Number 10 of 2025, which regulates Article 21 Income Tax borne by the Government (PPh 21 DTP) on certain types of income. In response to evolving policy needs in the taxation sector, the regulation was subsequently amended through PMK Number 72 of 2025, issued on 20 October 2025.

The Article 21 Income Tax incentive borne by the Government is granted to certain employees working for employers that meet specific criteria. This policy aims to safeguard household purchasing power, improve employee welfare, and serve as a fiscal instrument for economic and social stabilization amid national economic challenges.

Eligible employers include companies operating in the footwear, textiles and apparel, furniture, leather and leather goods, as well as tourism sectors. Eligibility is determined based on the company’s primary Business Field Classification Code (Klasifikasi Lapangan Usaha/KLU) as stipulated in the appendix to the relevant Minister of Finance Regulation.

Eligible employees consist of certain Permanent Employees and/or certain Non-Permanent Employees. Certain Permanent Employees are those who possess a Taxpayer Identification Number (NPWP) and/or a National Identification Number (NIK) that has been integrated with the Directorate General of Taxes’ administrative system. These employees receive fixed and regular gross income not exceeding IDR 10,000,000 per month, either in the January 2025 Tax Period for employees who commenced work prior to January 2025, or in the first month of employment for employees who began working in 2025. In addition, such employees must not be receiving any other Article 21 Income Tax incentives borne by the Government.

Fixed and regular gross income includes salaries, allowances, and similar compensation provided on a regular basis each month in accordance with company regulations and/or employment agreements, including benefits provided in kind and/or fringe benefits.

Meanwhile, certain Non-Permanent Employees are employees who also possess an NPWP and/or an integrated NIK, and receive average wages of no more than IDR 500,000 per day for daily, weekly, piece-rate, or contract-based payments, or no more than IDR 10,000,000 per month for monthly payments. These employees must likewise not be receiving any other Article 21 Income Tax incentives borne by the Government under prevailing tax regulations.

With respect to the incentive period, the Article 21 Income Tax incentive borne by the Government is granted from the January 2025 Tax Period through the December 2025 Tax Period for employers operating in the footwear, textiles and apparel, furniture, and leather and leather goods sectors. For the tourism sector, the incentive applies from the October 2025 Tax Period through the December 2025 Tax Period.

To utilize the incentive, employers are required to pay the Article 21 Income Tax borne by the Government in cash to eligible employees at the time income is paid. Such payments, including cases where employers provide Article 21 tax allowances or bear the Article 21 Income Tax on behalf of employees, are not treated as taxable income for the employees.

If the total amount of Article 21 Income Tax borne by the Government that has been withheld and granted as an incentive during a calendar year exceeds the Article 21 Income Tax payable for the relevant Tax Year, the excess amount will not be refunded to the employee. However, an exception applies to certain permanent employees in the tourism sector, where the excess portion of tax not borne by the Government may be refunded by the employer.

Furthermore, if an eligible employer submits the Monthly Article 21/26 Income Tax Return (SPT Masa) and reports an overpayment, any overpayment arising from Article 21 Income Tax borne by the Government cannot be refunded or credited. An exception applies to employers operating in the tourism sector, whereby overpayments derived from tax not borne by the Government may be credited to subsequent tax periods to the extent of the non-government-borne portion.

As part of compliance requirements, employers utilizing the Article 21 Income Tax incentive borne by the Government are obligated to report the utilization of the incentive for each tax period through the submission of the Monthly Article 21/26 Income Tax Return for the January 2025 through December 2025 Tax Periods. The submission and correction of such tax returns may be treated as reporting of incentive utilization, provided they are submitted no later than 31 January 2026.

This Article 21 Income Tax incentive borne by the Government is expected to provide additional liquidity for employees and businesses, while strengthening national economic resilience throughout 2025.

This article reflects the personal views and opinions of the author and does not represent the official policy or position of any institution.

Giyarso
Junior Tax Counselor