Since the January 2024 tax period, withholding of Article 21 Income Tax for permanent employees has used the Average Effective Rate (TER) scheme under GR 58/2023 and MoF Regulation 168/2023. The goal is administrative simplicity: employers no longer need to calculate net income, occupational expense deductions, and the non-taxable income threshold every single month — just one multiplication.
The basic structure: TER monthly, Article 17 in December
- January–November: Article 21 tax = monthly gross income × the monthly effective rate (TER) for the relevant category.
- December (or the final tax period): recalculated for the full year using the progressive Article 17 rate on taxable income, minus the total Article 21 already withheld January–November. The difference is withheld (or refunded) that month.
So TER isn't a final tax — it's just a monthly "installment" that gets reconciled at year-end. Total annual tax still follows the same progressive rate as before.
Three TER categories: A, B, and C
The category is determined by the employee's non-taxable income (PTKP) status at the start of the tax year:
| CATEGORY | PTKP STATUS | ANNUAL PTKP |
|---|---|---|
| A | Single/no dependents, single/1 dependent, married/no dependents | Rp54M – Rp58.5M |
| B | Single/2–3 dependents, married/1–2 dependents | Rp63M – Rp67.5M |
| C | Married/3 dependents | Rp72M |
Each category has its own tiered rate table based on monthly gross income brackets — ranging from 0% for low income up to 34% for the highest bracket. The full table is in the appendix of GR 58/2023.
A simple worked example
Rina, single with no dependents (Category A), earns a fixed salary plus allowances of Rp10,000,000 per month.
- January–November: gross income of Rp10 million falls in Category A's TER bracket at a 2% rate. Monthly Article 21 = 2% × Rp10,000,000 = Rp200,000. Total for 11 months = Rp2,200,000.
- December: recalculate the full year the old way — annual gross Rp120 million, less 5% occupational expense (max Rp6 million) = net income Rp114 million, less PTKP Rp54 million = taxable income Rp60 million. Annual tax (Article 17) = 5% × Rp60 million = Rp3,000,000.
- December Article 21 = Rp3,000,000 − Rp2,200,000 = Rp800,000.
Common mistakes
- Wrong category. PTKP status is fixed as of the start of the year. An employee who marries in March still uses their January 1st status for that tax year.
- Incomplete gross income. TER is multiplied against the entire monthly gross income — including allowances, overtime pay, bonuses, holiday bonuses (THR), and insurance premiums paid by the employer. A large bonus in a single month automatically pushes that month into a higher bracket.
- Forgetting the December recalculation. Without year-end reconciliation, total withholding can end up larger or smaller than the actual liability — and the annual withholding certificate (1721-A1) becomes inaccurate.
- Non-permanent and non-employee workers have their own daily TER scheme and separate rules — don't conflate them with permanent employees.
Administrative tips for employers
- Update PTKP data for all employees every start of year — request written dependent declarations.
- Automate the TER table in your payroll system, but do a manual spot-check every quarter.
- Archive the December recalculation working papers per employee; this is usually the first document requested during an Article 21 audit.
- Issue withholding certificates on time through the DGT administration system (Coretax) so employees can easily file their annual returns.
Disclaimer: This article was prepared as general information as of June 5, 2026 and does not constitute tax advice for any specific case. Tax regulations are subject to change. For guidance on your specific business situation, please consult the Sentary Consulting team or a registered tax consultant.