Income tax treatments for Benefits in Kind (“BIK”)

1

Food and/or beverages and their ingredients provided to all employees[3]:

a)

Food and/or beverages provided by the employer at the workplace.

b)

Food and/or beverage voucher[4] for employees who due the nature of their work cannot take advantage of the provision of food and/beverage at the workplace, including employees in the marketing department, transportation department, and other external services. The value of the voucher that is exempted from tax (i.e., tax-exempt value) is: (i) not more than IDR 2 million per month for each employee; or (ii) disbursement value to provide food and/ or beverages for each employee in a month that are provided by the employer at the workplace as mentioned in B.1(a) in case the disbursement value by the employer are more than IDR 2 million per month for each employee. The excess value of the actual voucher amount over the tax-exempt value is taxable income for the employee.

c)

Food and/or beverage ingredients for all employees with a certain value threshold. (see point B.5)

2

BIK provided in designated areas[5] (See Section D below), which covers facilities, infrastructure and/or facilities at the workplace for employees and their families in the form of housing, health services, education, place of worship, transportation and/ or sports (but excluding golf, power boating, horse racing, gliding or motorsports) provided the employer’s business location obtains a designated area decree from the Director General of Tax (DGT). The facilities, infrastructure and/ or facilities given to employees and their families at the workplace are the ones that are organized by: (i) the employer independently; and/ or (ii) other parties who work together with the employer and the employer is the one who bears the costs of the facilities, infrastructure and/ or facilities given to the employees and their families.

3

BIK that must be provided by employer for the execution of work[6] related to the requirements of the job, concerning security, health and/or safety of employees as required by the relevant Ministries or Agencies pursuant to statutory provisions, including:

• Uniforms;
• Work safety equipment;
• Employee shuttle service;
• Lodging for crew members of ships and similar; and/or
• Benefits in-kind received within the framework of handling endemic, pandemic or a national disaster.

4

BIK sourced or funded by State Government / Regional Government / village budget.

5

BIK of certain types and/or thresholds having regard to[7]:

• the type and/or value of the received BIK; and/or
• the eligibility criteria for the recipient, value and/ or function of the BIK.

C.

The taxable amount of BIK[9]

1

The taxable amount of BIK is valued based on:

a)

the market value for remuneration in-kind; and/ or

b)

the amount of costs incurred or which should be incurred by the provider for remuneration in the form of benefits.

2

In the case that BIK is given by the provider in the form of goods that are initially for trading, the taxable amount is valued based on:

a)

the market value for land and/or buildings; or

b)

the cost of goods sold for other than land and/or buildings.

3

The value of BIK in relation to the enjoyment of facility/service given in respect of employment that is provided with a utilization period of more than one month shall be carried out every month for as long as the BIK utilization period.

4

In case BIK on a facility and/ or service is given to more than one recipient, the taxable value is based on the amount of costs incurred or should be incurred and shall be allocated proportionally to each of the recipient based on the recording of the BIK utilization.

5

The employer or BIK provider should withhold income tax on the BIK provided in accordance with the prevailing tax laws and the income tax withholding shall be carried out at the end of the month at:

a)

the earlier of the transfer, or when the income becomes payable for remuneration in- kind; or

b)

the relinquishment of right or part of the right on the right to use of a facility and/ or service by the provider for remuneration in the form of benefits.

6

It is not mandatory for employers/providers of BIK to withhold Article 21 income tax on BIK provided during January to June 2023 tax periods. However, in this case, the income tax payable on any BIK related to employment or service received from 1 January 2023 to 30 June 2023 where the income tax has not been withheld by the employer must be calculated and paid by the BIK recipients and reported in their annual individual income tax returns.

1

To be a designated area, it must have the potential for economic development but lack economic infrastructure and be difficult to reach by public transportation, whether from land, sea, or air, so that investors must bear relatively high risks and be subject to a long pay-back period. Designated areas include areas of seawater that have a depth of more than 50 meters where the seabed has mineral reserves, and remote areas. [10]

2

There are eight economic infrastructure, and three public transportation criteria that are used to indicate whether an area can have a designated area status. The eight economic infrastructure criteria are: (i) electricity; (ii) clean water; (iii) housing that can be rented by employees; (iv) hospital and/ or health clinics; (v) school; (vi) permanent sport facility and/or entertainment; (vii) worship place; and (viii) market. The three public transportation criteria are: (i) roads and/ or bridges; (ii) seaport or dock, river port or dock, or airport; and (iii) land, sea, or air public transportation. [11]

3

The employer workplace that can obtain a designated area status is determined by the unavailability or unsuitability of at least six out of 11 types of economic and public transportation infrastructure as mentioned in D (2) above. Of the minimum six unavailable or unsuitable items, at least one type should be public transportation infrastructure. In case the employer has independently built the economic and public transportation infrastructures, such built infrastructures will be included as part of infrastructures that are not available in the determination of unavailability or unsuitability of economic and public transportation infrastructure. [12]

4

The designated area status for employer’s workplace can be given: (i) until the expiration of certain mining license, for employer who is the holder of certain mining license (i.e., contract of work, coal contract of work, or mineral and coal mining licenses); or (ii) for a five-year period, for an employer other than a mining license holder. [13]

5

The DGT has the authority to determine a designated area for employer workplace. The DGT has delegated this authorization to the Head of Regional Tax Office where the employer with head office status (i.e., Head Office Employer) is located. [14]

6

The Head Office Employer that has workplace at a designated area can apply for designated area status to the Head of Regional Office where Head Office Employer is located by attaching: (i) company registration number (NIB) issued by OSS agency or other similar document; (ii) location map; and (iii) statement letter on the economic and public transportation infrastructures condition at the workplace’s location. The written application can be submitted: (i) directly; (ii) via post, courier service; or (iii) electronically, to the Head of Regional Tax Office of Head Office Employer via the Head of Tax Office where the Head Office Employer is registered. [15]

7

The Head Office Employer that can apply for designated area status must meet the following conditions:

a)

It must have submitted: (i) annual income tax returns for the last two fiscal years; and/ or (ii) monthly VAT returns for the last three tax periods, which form part of its tax obligations under the prevailing tax laws;

b)

It must not have any tax payable or has tax payable but has a deferment or installment approval to pay the tax payable; and

c)

It must not be under tax criminal investigation and/ or money laundering criminal investigation arising from a tax crime. [16]

8

The designated area decree must be issued by Regional Tax Office of Head Office Employer not more than four months after the completed application is received. [17]

1

For designated area decree issued based on the MoF Regulation No 167/PMK.03/2018 (PMK 167), the decree is still valid until the expiration period under the decree.

2

The BIK treatments provided in the designated area determined by a decree issued based on PMK 167 shall follow the treatments under PMK 66.

3

On the application of designated area status received before the issuance of PMK 66 but has not yet been approved, the Regional Tax Office where Head Office Employer is located shall process the application based on the provisions under PMK 66.

4

On the application of designated area status received before the issuance of PMK 66 but based on investigation the application is not complete and a request letter to complete the supporting documents is not yet issued, the Regional Tax Office where Head Office Employer is located shall issue a request letter to complete the supporting documents not more than 15 days after the enactment of PMK 66.

5

On the application of designated area status received before the issuance of PMK 66 where Regional Tax Office has carried out investigation but has not yet issued a decree after four months of when the complete application is received, it must issue the decree not more than six months after the application is completely received; or one month after the enactment of PMK 66, whichever is earlier.

6

For a mining license holder employer who already has a designated area decree, where the decree will expire after the enactment of PMK 66, it must re-apply for extension of the designated area decree not more than four months before the decree period is expired.

7

At the time PMK 66 is enacted, PMK 167 is revoked and no longer valid.