Freelancers Paid Daily to Monthly: When Is Article 21 Withheld?
Question:
MY NAME is Winarman. I am a finance staff member at an agricultural processing company in the Lampung region. In our business operations, we employ casual daily workers to support production during certain seasons, with a wage payment system that may be daily, weekly or monthly.
However, we are still uncertain about the treatment of Article 21 Income Tax on the income of these casual daily workers, particularly regarding the determination of the tax base (dasar pengenaan pajak/DPP in Indonesian) and the applicable rates. In addition, is the company required to issue a withholding slip (bukti potong/Bupot in Indonesian) each time wages are paid? We would appreciate an explanation.
Winarman, Lampung.
Answer:
THANK you for your question, Mr Winarman. To answer it, we may refer to Minister of Finance Regulation No. 168 of 2023 on Instructions for the Implementation of Withholding Tax on Income in Connection with Employment, Services and Activities of Individuals (MoF Reg. 168/2023).
It should be noted that, referring to Article 1 number 11 of MoF Reg. 168/2023, casual daily workers may be categorised as non-permanent employees. The definition of a non-permanent employee under that regulation is an employee, including a freelander who only receives income when working based on the number of working days, the number of produced work units or the completion of a type of work.
In this regard, Article 3 paragraph (1) subparagraph d in conjunction with Article 5 paragraph (1) subparagraph d of MoF Reg. 168/2023 explains that the income of non-permanent employees constitutes a taxable object subject to Article 21 Withholding Tax (WHT), whether in the form of daily, weekly, piece-rates, lump-sum payments or monthly wages. Accordingly, the wages of freelanders are also subject to Article 21 WHT. See ’Provisions and Calculation of Art. 21 WHT on Casual Daily Workers’
So, how is the tax base and the Article 21 WHT rate determined for daily, weekly or monthly wage payments?
Technically, the determination of the Article 21 Income Tax base for non-permanent employees is governed by Article 12 of MoF Reg. 168/2023, which is grouped according to the frequency of payment and the daily wage threshold. Meanwhile, the determination of the applicable Article 21 Income Tax rate for non-permanent employees is governed by Article 16 paragraph (2) of MoF Reg. 168/2023.
The monthly average effective tax rate (tarif efektif rata-rata/TER in Indonesian) may refer to Government Regulation No. 58 of 2023 on Article 21 Withholding Tax Rates on Income in Connection with Employment, Services or Activities of Individual Taxpayers, together with its appendix (Gov. Reg. 58/2023).
For ease of reference, below is a summary of the Article 21 WHT formula for casual daily workers based on the wage payment scheme:
As an illustration, consider the following scenarios:
Scenario A (Daily Wage ≤ IDR450,000)
Mr X receives a wage of IDR400,000 per day, paid daily. Since the daily wage does not exceed IDR450,000, the Article 21 WHT is 0% × IDR400,000 = IDR0.
Scenario B (Average Daily Wage > IDR450,000 up to IDR2,500,000)
The following week, Mr X works for 5 days and receives a weekly wage of IDR3,500,000. His average daily wage is IDR700,000 (IDR3,500,000 ÷ 5 days), so the Article 21 WHT per day is 0.5% × IDR700,000 = IDR3,500, or a total of IDR17,500 for 5 working days.
Scenario C (Daily Wage > IDR2,500,000)
On another occasion, Mr X receives a daily wage of IDR3,000,000, paid on the same day upon completion of the work. Since the daily wage exceeds IDR2,500,000, Article 21 WHT is calculated using the Article 17 rate under the Income Tax Law on 50% of gross income, namely 5% × (50% × IDR3,000,000) = IDR75,000.
Scenario D (Monthly Wage Payment)
The following month, Mr X receives a total wage of IDR6,000,000, paid in a lump sum at the end of the month. Assuming Mr X has a tax status of TK/0, the Article 21 Income Tax calculation follows the monthly TER according to the gross income bracket, namely 0.75% × IDR6,000,000, amounting to IDR45,000.
Further, the tax administration obligations that must be fulfilled by Mr Winarman's company, as the withholding agent, include the issuance of an Article 21 Withholding Tax receipt. This is governed by the Director General of Taxes Regulation No. PER-11/PJ/2025 on Provisions for Reporting ITP, VAT, Luxury Goods Sales Tax, and Import Duty in the Context of the Implementation of the Core Tax Administration System as amended by PER-12/PJ/2026 on the Amendment to PER-11/PJ/2025 (PER-11/2025, as amended by PER-12/2026).
Several key provisions to note regarding the issuance of an Article 21 Withholding Tax receipt are as follows. First, pursuant to Article 6 paragraph (1) subparagraph c of PER-11/2025, as amended by PER-12/2026, Article 21 WHT on non-permanent employees must use Form BP21 (Non-Final/Final Article 21 Withholding Receipts for Resident Taxpayers other than permanent employees). See ’What Is Form BP21 and What Are the Taxable Objects?’
Second, referring to Article 7 paragraph (3) of PER-11/2025, as amended by PER-12/2026, it is stipulated that the company must provide an Article 21/26 Withholding Tax receipt to the income recipient each time a withholding receipt is issued.
This explanation is further elaborated in Article 7 paragraph (5) of PER-11/2025, as amended by PER-12/2026, which states that one withholding slip is intended for only one income recipient, one taxable object code and one taxable period. Therefore, the frequency of issuing Form BP21 is adjusted to the wage payment scheme, as follows.
- Daily payment: Form BP21 is issued for each working day or daily payment. If a worker works for 5 days and is paid daily, the company issues 5 separate withholding slips.
- Weekly payment: Form BP21 is only issued once for each income recipient and taxable object code within the relevant taxable period. For example, if wages are paid several times within one taxable period, the company issues only 1 withholding slip.
- Monthly payment: Form BP21 is only issued once for each income recipient and taxable object code within one taxable period.
Accordingly, the treatment of Article 21 Income Tax on casual daily workers at Mr Winarman's company is determined by the frequency of wage payment and the amount of daily income. In addition, for administrative purposes, the company is required to use the following taxable object codes (KOP):
- 21-100-24: for non-permanent employees paid on a daily, weekly, piece-rate or lump-sum basis with gross income not exceeding IDR2,500,000 per day;
- 21-100-30: for non-permanent employees paid on a daily, weekly, piece-rate or lump-sum basis; or
- 21-100-35: for non-permanent employees whose wages are paid on a monthly basis.
That concludes our answer. We hope it is helpful.
As a note, the Tax Consultation column is published every week to answer selected questions from loyal DDTCNews readers. For those who wish to submit a question, please send it to the following e-mail address: [email protected]. (dik)