The phrase "net salary of Rp10 million" in a job offer letter sounds simple. Behind it are three decisions at once: how much the employee actually receives, how much can be recorded as a company expense, and how the payslip will read later. Some companies still choose their methods based on outdated regulations.
The Nonexistent Dichotomy
For years, payroll guidelines stated: tax allowances can be expensed, while the corporate-paid PPh 21 cannot. The nature and benefits regime obscured that distinction. Since PP 55/2022 and PMK 66/2023, benefits have become income for the recipient and expenses for the provider, and the PPh 21 borne by the employer includes benefits.
Functional Tax Consultant Expert Dian Anggraeni from DJP stated openly in 2023: after PP 55/2022 and PMK 66/2023, there is no longer a distinction between PPh borne by the company and that supported by the company; the mechanism has become the same. The obligation to withhold on nature and benefits has been in effect since the July 2023 tax period.
Only One True Difference Remains
Of the three methods commonly compared, only one yields a different figure.
- Gross. Tax is deducted from the employee's income. The employee's take-home pay is smaller, and the company's expense is also smaller.
- Gross up. The company adds a tax allowance equal to the tax owed, and that allowance appears as a component on the payslip.
- Net. The company directly bears the tax, without an allowance component on the payslip.
Gross up and net are now calculated in the same way and both can be expensed. The difference is administrative: the wording on the payslip and the wording of the employment agreement, not the amount of tax.
The Most Common Arithmetic Error
Adding the rate to the net salary never results in the correct figure, as the tax allowance itself also becomes taxable. The gross amount is found by division, not multiplication: net salary divided by one minus the effective rate.
For example, if the promised net salary is Rp10,000,000 and the monthly effective rate is 5 percent. The incorrect method multiplies by 1.05, resulting in a gross of Rp10,500,000; after deducting 5 percent, the employee only receives Rp9,975,000, which is Rp25,000 less than promised. The correct method divides Rp10,000,000 by 0.95, resulting in a gross of Rp10,526,316; the tax is Rp526,316 and the remainder is exactly Rp10,000,000. The difference per person is indeed small, then multiplied by the number of employees and twelve tax periods. This division is used by the gross up PPh 21 calculator to derive the gross and the amount of tax allowance from the promised net value.
Monthly Comparison is Not Annual Expense
Since PP 58/2023 and PMK 168/2023, PPh 21 for employees is still calculated using the monthly effective rate for regular tax periods, then recalculated using the Article 17 rate in the final tax period. This recalculation can result in underpayment or overpayment in December. Any excess withholding must be returned to the employee along with the issuance of the withholding slip, no later than the end of the following month after the final tax period.
Thus, comparing methods for one tax period is useful for decision-making, but not as an annual expense figure. THR, bonuses, and BPJS contributions still shift it. To see the three methods side by side for one tax period without preparing your own worksheets, there is a PPh 21 method comparison tool that uses the monthly effective rate.
Two Deadlines, and One Old Rule That Has Lapsed
Since PMK 81/2024 takes effect on January 1, 2025, the payment of PPh Article 21 is due by the 15th of the month following the end of the tax period, shifting from the 10th under previous regulations. The SPT Masa reporting remains due by the 20th. If the deadline coincides with a holiday, the execution is postponed to the next working day. PMK 81/2024 itself has been amended several times, so check the latest version before preparing your compliance calendar.
One rarely noted side effect: the limitation of 50 percent expense deduction on mobile phone costs, credits, and vehicles in KEP-220/PJ/2002 is no longer aligned with the new nature regime. DJP states that this provision has not been formally revoked, but it has implicitly become obsolete.
What needs to be rechecked in your company are three things: the wording of the employment agreement, how payroll derives gross from the net value, and how the expenses are treated in the accounting records. All three stem from one sentence in the offer letter written long before the first tax period commenced.
Sources
- DDTCNews, "Becoming a Tax Object, This is DJP's Statement on PPh Article 21 Borne by the Company", July 12, 2023. news.ddtc.co.id
- Regulation of the Minister of Finance Number 168 of 2023 on Guidelines for the Implementation of PPh Article 21/26 Withholding, full text. pajak.go.id
- Pajakku, "Provisions on Effective Rate Withholding of PPh 21 in PMK 168/2023", January 9, 2024. pajakku.com
- Regulation of the Minister of Finance Number 81 of 2024 on Tax Provisions in the Implementation of the Core Tax Administration System, effective January 1, 2025. jdih.kemenkeu.go.id
- Pajakku, "Latest Payment and Tax Deposit Deadlines Starting 2025 According to PMK 81/2024". pajakku.com