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This is a brief overview of the requirements, calculation and payment of personal income taxes in Indonesia. The Employer's and Individual's Role in Personal Income Tax Your employer is the body responsible for the calculation of any taxes that need to be withheld from your salary, monthly payment of these taxes to the tax authorities, and provision of annual numbers to the employee. The individual employee must then file an annual income tax return for the year in question. Under the old system, the income tax of an individual who only has one source of income was processed by his or her employer. Employers were able to pay the tax of all their employees under one NPWP number (Nomor Pendaftaran Wajib Pajak - Registration number for those obligated to pay taxes), assuming that employees only had this one source of income. Currently, the individual taxpayer is legally responsible for ensuring that they've registered with the tax office and comply with the regulations and payment of the taxes due.

Employers have three choices for the personal income tax calculation: • Employee's salaries are classified as Gross and tax is calculated on this, withheld from employee and paid via the banking system to the tax office. • Employee's salaries are classified as Net and then grossed up to establish a gross amount from which the tax is calculated to bring the remainder back to the net amount as expressed in the employment letter. • The tax is calculated on the net and treated as a fringe benefit. Of special concern to expatriates in when your salary is quoted and paid net. Though your employer may have agreed in your contract to pay your taxes - you are still personally liable for their payment.

Ask your employer to show you receipts showing that taxes have been paid for you on a monthly basis. The required is 1721-A1, which is the actual annual return and a S.S.P.

Which is the actual proof of payment. It's very good to have your compensation package expressed in gross amounts.

It then is defensible that as you only received the net amount the employer has deducted tax and is therefore liable for the payment to the Tax Office. Those expatriates working for local PT companies (not the case for multinational firms) may find that in the past their employer “negotiated” their tax with the tax officials. This could come back to haunt you in the future. If your salary was quoted net, and you felt your local employer had paid your taxes according to your agreement, you may find in fact that the taxes were not paid and you are then legally liable for back taxes. Each employee is supposed to receive their monthly tax calculation from their employer, and at the end of the year or the latest by March of the next year, the company has to produce Form 1721-A1, which summarizes how much taxes the company has been paying for each employee.