Presidential Adviser Proposes Nullification of JHT Tax
JAKARTA, DDTCNews - Special Presidential Adviser on Labour and Workers' Welfare, Said Iqbal, has proposed the nullification of the tax on income in the form of old age security (jaminan hari tua/JHT in Indonesian), religious holiday allowances (tunjangan hari raya/THR in Indonesian), pensions and severance pay.
According to Said, the fraction of an employee's wages used to accumulate old age security has already been subject to Article 21 Income Tax. He therefore argued that there is no need to tax old age security when it is withdrawn by workers.
"Ideally, the tax on JHT should be nullified. The same applies to severance pay, pensions and THR. Those should be nullified too," he said on social media, as quoted on Monday (29/6/2026).
Said stated that he would submit the proposal to President Prabowo Subianto, and would write to the Minister of Finance, Purbaya Yudhi Sadewa, to push for a review of the tax treatment of the old age security.
"I will write to Purbaya as special presidential adviser to review this policy," Said remarked.
On another note, old age security is a form of pension benefit subject to a final Article 21 Income Tax of 0% to 5% when paid in a lump sum. The taxation of old age security has also been reviewed by DDTCNews in a focus report entitled Preparing for Retirement: Understand the Tax Scheme.
Pursuant to Gov. Reg. 68/2009, old age security paid in a lump sum is subject to a final Article 21 Income Tax at 0% on gross income up to IDR50 million and 5% on gross income exceeding IDR50 million.
The old age security is deemed to be paid in a lump sum and subject to final Article 21 Income Tax if withdrawn in part or in full, within a maximum period of 2 calendar years. If not paid in a lump sum, the old age security is subject to Income Tax at progressive rates of 5% to 35% pursuant to Article 17 of the Income Tax Law (ITL).
Please note that old age security is only taxed when a worker conducts a withdrawal, given that the government does not impose tax on old age security contributions paid to the Employment Social Health Insurance Administration Body (BPJS Ketenagakerjaan).
Pursuant to Article 4 paragraph (3) subparagraph g of the ITL, contributions by participants and/or employers are excluded from taxable objects, provided they are remitted to a pension fund whose establishment has been approved by the Financial Services Authority (Otoritas Jasa Keuangan/OJK in Indonesian).
Under MoF Reg. 168/2023, pension and old age contributions paid by employees through their employer to BPJS Ketenagakerjaan constitute one of the deductible expenses in Article 21 Withholding Tax.
This is consistent with the exempt-exempt-taxed (EET) approach applied by Indonesia to tax income in the form of pension benefits. See: Reviewing Pension Fund Taxation: Reflections and Current Practice. (rig)
