The government anticipates that 2026 will remain a challenging year marked by heightened uncertainty. Ongoing geopolitical tensions, domestic security concerns, and Indonesia’s exposure to natural disasters continue to weigh on economic growth.
To help preserve household purchasing power and support macroeconomic stability, the government has introduced a series of fiscal stimulus measures. One such measure is the government-borne Article 21 withholding tax incentive, which applies throughout 2026.
The incentive is available only for the January - December 2026 tax periods. It is limited to permanent and temporary employees working in specific sectors, including footwear, textiles and apparel, furniture, leather and leather goods, and tourism.
Eligibility Criteria for the Government-Borne Article 21 Incentive
As noted above, the Article 21 incentive applies exclusively to permanent and temporary employees in eligible industries. For permanent employees, the government-borne Article 21 withholding tax incentive applies where the employee holds a taxpayer identification number (nomor pokok wajib pajak/NPWP) or national identification number (nomor induk kependudukan/NIK), receives a fixed monthly gross income of less than IDR 10 million, and does not receive any other Article 21 income tax incentive.
For temporary employees, the incentive is available to those who hold an NPWP or NIK, earn an average daily income of less than IDR 500,000, and do not receive any other income tax incentives.
Employer Obligations
As the withholding agent, the employer is required to pay the government-borne Article 21 income tax to the employee in cash. In practice, this means that the employee receives their income in full, without any Article 21 withholding, as the government bears the tax liability.
Nevertheless, the employer remains obligated to issue an Article 21 withholding tax slip and report the utilization of the Article 21 incentive for each relevant tax period. The utilization of the incentive must be reported through the monthly Article 21 withholding tax return and submitted no later than December 27, 2027.
Failure to submit the report on time may result in the rejection of the incentive claim, in which case the employer would be required to pay the Article 21 withholding tax previously borne by the government.
Government-Borne Article 21 Withholding Tax Overpayment
Where, at year-end, the amount of government-borne Article 21 withholding tax exceeds the Article 21 income tax payable by a permanent employee, the overpaid amount will not be refunded to the employee.
The employer must still submit the monthly Article 21 withholding tax return and disclose the overpayment. However, overpayments arising from government-borne Article 21 incentives cannot be refunded or carried forward as tax credits.
Illustrative Calculation of the Article 21 Incentive
Mr. C began working as a permanent employee at PT X, a travel agency classified under KLU 79121, in March 2026. He is single with no dependents (TK/0). Mr. C receives a fixed monthly salary and allowances totaling IDR 9 million. In October 2026, he also received a one-off bonus of IDR 5 million. Mr. C’s total income for 2026 is summarized below:
| Month | Fixed Income (IDR) | Irregular Income (IDR) | Gross Income (IDR) |
| March | 9,000,000 | - | 9,000,000 |
| April | 9,000,000 | - | 9,000,000 |
| May | 9,000,000 | - | 9,000,000 |
| June | 9,000,000 | - | 9,000,000 |
| July | 9,000,000 | - | 9,000,000 |
| August | 9,000,000 | - | 9,000,000 |
| September | 9,000,000 | - | 9,000,000 |
| October | 9,000,000 | 5,000,000 | 14,000,000 |
| November | 9,000,000 | - | 9,000,000 |
| December | 9,000,000 | - | 9,000,000 |
| Total | 90,000,000 | 5,000,000 | 95,000,000 |
Because Mr. C earned a fixed monthly gross income of no more than IDR 10 million in his first month of employment, and because PT X’s business classification is listed in the attachment to the relevant ministerial regulation, Mr. C qualifies for the government-borne Article 21 incentive on all income received in 2026, including both fixed and irregular income.
Government-Borne Article 21 Withholding Tax Calculation
| Month | Gross Income (IDR) | Monthly Effective Rate (A) | Article 21 Withholding Tax (IDR) | Income After Tax (IDR) | Government-Borne Article 21 Withholding Tax (IDR) | Income after Government-Borne Tax (IDR) |
| March | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| April | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| May | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| June | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| July | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| August | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| September | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| October | 14,000,000 | 6.00% | 840,000 | 13,160,000 | 840,000 | 14,000,000 |
| November | 9,000,000 | 1.75% | 157,500 | 8,842,500 | 157,500 | 9,000,000 |
| December | 9,000,000 | (287,500) | 9,000,000 | (287,500) | 9,000,000 | |
| Total | 95,000,000 | 1,822,500 | 92,900,000 | 1,822,500 | 95,000,000 |
Calculation of Article 21 Income Tax Payable in December 2026
| Description | Amount (IDR) | |
| Annual Gross Income | 95,000,000 | |
| Deduction: | ||
Job-Related Expenses (5% x IDR 95,000,000, capped at IDR 500,000 per month) | ||
4,750,000 | 4,750,000 | |
| Annual Net Income | 90,250,000 | |
| Annual Non-Taxable Income | 54,000,000 | |
| Annual Taxable Income | 36,250,000 | |
| Income Tax (5%) | 36,250,000 | 1,812,500 |
| Article 21 Tax Withheld Through November 2026 | 2,100,000 | |
| Over-withheld Article 21 Tax | (287,500) | |
Based on the above calculation, the following points should be noted:
- The government-borne Article 21 withholding tax of:
- IDR 157,500 per month from March to September 2026 and in November 2026; and
- IDR 840,000 in October 2026 must be paid in cash by PT X when paying Mr. C’s income.
- The government-borne Article 21 overpayment of IDR 287,500 in December 2026 is not refundable to Mr. C.
- PT X must issue an Article 21 withholding tax slip reflecting the government-borne incentive.
Also Read
https://ideatax.id/articles/decoding-the-new-delta-spt
https://ideatax.id/articles/pmk-1122025-updates-to-the-tax-treaty-implementation-procedures
https://ideatax.id/articles/updates-to-the-05-msme-final-income-tax-and-its-business-impact
