Prior to Law No 7/2021 on the Harmonization of Tax Regulations (“UU HPP”), Benefits in Kind (BIK) provided to employees were not taxable income for that employee unless the employer wished to claim a deduction for the cost of providing the BIK or if that employer was not subject to profit-based income tax (e.g., the employer was a Final Taxed business or a KP3A or KPPA Representative Office). Following the enactment of UU HPP, commencing the later of 1 January 2022 or the commencement of the employer’s 2022 Tax Year, all BIK are an income tax object for the employee, unless otherwise regulated.
The issue of Government Regulation No. 55 on 20 December 2022 (“PP-55”) provides additional information regarding the taxation of Benefits in Kind (BIK). It further stipulates that the cost of the reimbursement or compensation in the form of BIK with respect to employment or services is a deductible expense for the employer provided it is a cost to obtain, collect, and/or maintain taxable income/revenue (known as 3M in Bahasa Indonesia).
Click below to read more about the current update for taxation of Benefits in Kind: