Collection of “Enjoyment” Tax Faces Uncertainty

The government has officially imposed an Income Tax or PPh on benefit-in-kind or enjoyments. However, the collection of the “enjoyment” tax has been overshadowed by uncertainty.

ALIF ICHWAN

Officers from the Jakarta Cilandak Primary Tax Service Office, Jakarta, Friday (12/20/2019) serve taxpayers who seek information and report problems related to E-Faktur, PPH TIN and other letters.

JAKARTA, KOMPAS — The government has officially imposed an Income Tax or PPh on benefit-in-kind or enjoyments such as non-cash goods, facilities and services that employees receive from companies. However, the collection of the “enjoyment” tax has been overshadowed by uncertainty because until now the technical regulations of the new tax objective are not yet complete.

Government Regulation (PP) Number 55 of 2022 concerning the Adjustment of Arrangements on the Income Tax, which was issued on Dec. 20, 2022, stipulates that employees are required to calculate and pay their own income tax payable for any benefit-in-kind they have received from the company where they work throughout 2022.

The tax on non-cash income must be paid and reported within three months, no later than the due date for the submission of the 2022 annual notification letter (SPT) or Tax Return, which is March 31, 2023. Meanwhile, starting Jan. 1, 2023, companies are required to deduct directly the Income tax on rewards or benefits given to employees.

Also read:

> Tax Revenue Set Relatively High

> An Increase in State Revenues Indicates Economic Recovery

The Center for Indonesia Taxation Analysis (CITA) research manager, Fajry Akbar, said in Jakarta on Wednesday that the implementation of the benefit-in-kind tax this year would not be effective because there was legal uncertainty. Until now, the government has not issued any technical regulations regarding goods and facilities that are exempted as a tax object, including procedures for calculating the limit on the value of compensation to be taxed.

Moreover, the “enjoyment” tax is a new thing. Before Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (HPP) came into effect, compensation other than money in the form of goods or certain facilities received by employees was not part of the tax object or taxable income.

The “enjoyment” tax is a new thing.

"PP No. 55 of 2022 has not set specifics. Another technical regulation is still needed in the form of a Finance Minister Regulation (PMK), which is not yet known when it will be issued. Not to mention the technical familiarization in the field has not been carried out. In fact, earlier this year, we were required to report the [SPT]," said Fajry.

In his opinion, it is unrealistic if the government rushes to impose a benefit-in-kind tax when the rules are still confusing. That would be confusing and burdensome for employees who would have to recalculate and pay taxes on the benefits they received last year, in just three months. "I doubt it will be effective. It is better if this is enforced after the PMK is issued," he said.

Unclear

PP No. 55 of 2022 already regulates several types of compensations that can be excluded from the benefit-in-kind tax. However, this provision is still too broad and fanciful.

Article 24, for example, excludes food and drinks for all employees, benefit-in kind or enjoyment provided in certain areas, benefit-in-kind or enjoyment that must be provided by the employer in carrying out work, benefit- in-kind or enjoyment sourced or financed by state funds, as well as in-kind or enjoyment with certain types or limits.

KOMPAS/RADITYA HELABUMI

A taxpayer takes a queue number at the Jakarta Palmerah Primary Tax Service Office (KPP), West Jakarta, Thursday (31/3/2022).

Some examples of these exceptions are described in Articles 25-27, such as foods provided by the company at work, housing facilities for employees in remote areas, non-luxurious sports (for example other than golf, horse racing, gliding or automotive), uniforms, as well as facilities for employees in the context of dealing with a pandemic or disaster.

However, PP No 55/2022 does not yet regulate procedures for assessing and calculating the limit on the value of compensation that can be included as a tax object.

A simple example is a laptop for workers. Does it include tax objects or non-tax objects?

The executive director of Pratama-Kreston Tax Research Institute, Prianto Budi Saptono, said without a calculation procedure it would be difficult to determine whether or not compensation was excluded. This is because the types of goods and facilities provided by the company are very diverse.

”A simple example is a laptop for workers. Does it include tax objects or non-tax objects? This just isn't clear. Therefore, there must be more technical arrangements, provisions for the amount [value] that later need to be scrutinized in the PMK," said Prianto.

Justice

The PMK must also clarify the rules for imposing taxes in-kind so as not to burden middle-low income employees. This is to fulfill the principle of fairness in taxation, according to the government's promise that in-kind taxes will be more directed to upper-middle class employees who receive exclusive facilities

Another solution is negotiation between the employee and the company. "It must be proportional. If there are 100 employees, for example, who receive the same compensation, the percentage must be differentiated according to the total income of each. This can go back to the [bipartite] agreement even though there is legal uncertainty about what and who can be the [tax] object," he said.

Prianto believes that workers and companies need to talk before the deadline of the submission of the SPT of the tax return. In addition to reviewing benefits over the past year, it is also to negotiate remuneration for employees to pay the unexpected income tax. "Because if the 2022 tax is borne by employees, the March 2023 salary might be used up to pay the income tax," he said.

Also read:

> New History of Indonesian Taxation

Director-General of Taxes of the Finance Ministry Suryo Utomo said the government would hasten the preparation of PMK regarding taxes on benefit-in-kind or enjoyment. Currently, the PMK draft is being discussed. "Later on, we will convey what goods and services can be excluded," Suryo said at a press conference on the state budget on Tuesday (3/1/2023).

He emphasized that even though PP No. 55/2022 was only issued late last year, according to the mandate of the HPP Law, the collection of the benefit-in-kind tax must take effect starting from the 2022 tax year and should be included the SPT report, which must be submitted in March," he said.

This article was translated by Hendarsyah Tarmizi.