A. Legal Basis

(i)

Law Number 7 of 1983 concerning Income Tax as last amended by Law Number 6 of 2023 (ITL);

(ii)

Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations (HPP Law);

(iii)

Minister of Finance Regulation Number 168 of 2023 concerning Instructions for the Implementation of Withholding Tax on Income in Connection with Employment, Services and Activities of Individuals (MoF Reg. 168/2023); and

(iv)

Government Regulation of the Republic of Indonesia Number 58 of 2023 concerning Article 21 Withholding Tax Rates on Income in Connection with Employment, Services or Activities of Individual Taxpayers (Gov. Reg. 58/2023).

B. Definition and Duties

There are numerous interesting activities in the community, ranging from activities held in the community, lectures to companies. Despite having different objectives, each activity certainly has event participants attending.

Event participants are people who participate in the implementation of an activity. In an activity, it is not uncommon for an amount of remuneration to be granted to event participants for their participation in enlivening the activity. This may definitely further encourage everyone to participate in an activity as an event participant.

Viewed from the aspect of taxation, the remuneration is an additional income for the event participants. The remuneration received by event participants may be categorised as an income tax object. Thus, if an event participant derives remuneration from an activity, the remuneration will be subject to income tax.

Pursuant to MoF Reg. 168/2023, an event participant is an individual who receives or accrues remunerations in connection with his/her participation in an activity. The remunerations are remuneration other than the income received by a permanent employee from the employer.

The remuneration received by the event participant is an additional income for the event participant who is subject to income tax. The remuneration offered for event participants can add enthusiasm for participants so that they can participate in activities with enthusiasm, enthusiasm and totality.

Further, Article 3 of MoF Reg. 168/2023 states that event participants include:

(i)

participants in competitions in all fields, including sports, arts, agility, science, technology competitions and other competitions;

(ii)

participants in meetings, conferences, sessions, employment visits, seminars, workshops or shows or other certain activities;

(iii)

participants or members in a committee as organisers of certain activities; or

(iv)

students, trainees and interns.

Based on the above details, it can be concluded that if a person who participates as a participant in an activity pursuant to MoF Reg. 168/2023 and receives remuneration from his/her participation, the remuneration received must be subject to income tax on the event participant. The party organizing the activity is required to perform withholding tax on the remuneration granted to the event participants.

C. Event Participants’ Rights in the Scope of Taxes

In the scope of taxation, an event participant as a taxpayer (Wajib Pajak/WP in Indonesian) has rights that are protected by tax laws and regulations. The following are the rights of an event participant within the scope of taxes:

(i)

An event participant has the right to be informed of the amount of remuneration derived from the event organiser;

(ii)

An event participant has the right to be informed of the amount of withholding tax on the remuneration received from the event organiser;

(iii)

An event participant has the right to obtain a withholding receipt from the event organiser as proof of Article 21 Withholding Tax on the remuneration received from the event organiser; and

(iv)

An event participant has the right to apply for amendment if the received withholding receipt contains errors, either misspellings or miscalculations.

D. Event Participants’ Obligations in the Scope of Taxes

In addition to having rights, an event participant also has obligations that must be fulfilled as a taxpayer. The following are the obligations of an event participant within the scope of taxes:

(i)

An event participant who has fulfilled subjective and objective obligations as a taxpayer is required to register to obtain a Taxpayer Identification Number (TIN) and/or activate his/her national identification number (Nomor Induk Kependudukan/NIK in Indonesian) as the TIN. A TIN may be obtained online or by visiting the Tax Office (Kantor Pelayanan Pajak/KPP in Indonesian);

(ii)

An event participant is required to receive and retain Article 21 Withholding Tax receipts for the remuneration provided by the event organiser; and

(iii)

An event participant is required to file the annual individual tax return, including filing Article 21 Withholding Tax on the event participant’s remuneration.

E. Tax Treatment

E.1.

Income Tax Objects of Event Participants

In an event, generally, event participants will derive remunerations for the activities they have participated in. In the event that an event participant receives remunerations pursuant to the provisions under MoF Reg. 168/2023, the remunerations are included in the taxable object that must be subject to Article 21 Withholding Tax.

The following are the remunerations for event participants that must be subject to Article 21 Withholding Tax:

(i)

pocket money;

(ii)

representation money;

(iii)

meeting money;

(iv)

honoraria;

(v)

gifts or awards; and

(vi)

similar remunerations.

E.2.

Article 21 Income Tax on Event Participants

Pursuant to MoF Reg. 168/2023, to calculate Article 21 Income Tax on event participants, the tax base (Dasar Pengenaan Pajak/DPP in Indonesian) must be taken into account. The tax base on event participants is the amount of gross income paid in a lump sum and not split.

Further, the calculation of Article 21 Income Tax on event participants may be divided into 2 (two) categories. First, the calculation of Article 21 Income Tax on event participants who are not employees of the event organiser. Second, event participants constituting employees of the event organiser. The following is the calculation of Article 21 Income Tax on event participants.

E.2.1

Calculation of Article 21 Income Tax on Event Participants Not Constituting Employees of the Event Organiser

Article 21 Income Tax on event participants not constituting employees of the event organiser may be calculated by multiplying the tax base by the rates under Article 17 paragraph (1) subparagraph a. The tax rates pursuant to Article 17 paragraph (1) subparagraph a based on the HPP Law are as follows:

The tax base used in calculating Article 21 Income Tax is the amount of the remuneration for the event participant paid and received in full and not split. If the tax base is known, the next step is to calculate Article 21 Income Tax. The calculation of Article 21 Income Tax on an event participants may be conducted using the following formula.

E.2.2.

Calculation of Article 21 Income Tax on Event Participants Constituting Employees of the Event Organiser

If an event participant is an employee of the event organiser, the remuneration for the event participant will be aggregated with income from salary, allowances and other income accrued in 1 (one) taxable period. The aggregated income will be the Article 21 Income Tax base.

Further, the tax on the aggregated income received by the employee will be calculated pursuant to the provisions under Gov. Reg. 58/2023 using the average effective tax rate (Tarif Efektif Rata-Rata/TER in Indonesian) multiplied by the tax base. The average effective tax rate is obtained by taking into account the amount of gross income received by the event participant and the employee’s personal tax relief status.

If the event participant's income has been aggregated with the remuneration received for the event participant, the next step is to calculate tax payable. The aggregated income will be subject to Article 21 Withholding Tax pursuant to the provisions under MoF Reg. 168/2023.

The following is how to calculate Article 21 Income Tax on an event participant constituting an employee of the event organiser:

To see complete details of the average effective tax rate percentage based on the amount of gross income and personal tax relief status, please refer to Transactions Tax Guidelines: Article 21 Withholding Tax Rates on Income from Employment, Services or Activities.

E.3.

Article 21 Withholding Tax, Remittance and Filing for Event Participants

Article 21 Withholding Tax is performed by the event organiser. In addition to performing Article 21 Withholding Tax, the event organiser is required to prepare a withholding receipt for the withholding tax. The Article 21 Withholding Tax receipt for the remuneration must be submitted to the event participant.

Further, the event organiser is required to remit Article 21 Income Tax into the state treasury through tax payment banks or post offices. Article 21 Income Tax remittance is conducted no later than the 10^th of the following month after the taxable period ends.

If the event organiser has performed the remittance, the event organiser’s further obligation is to file Article 21 Income Tax. Filing is conducted no later than the 20^th of the following month after the taxable period ends.

Further, the withholding receipt that has been given by the event organiser to the event participant must be filed at the time of filing the annual individual tax return. The withholding receipt may be used as a tax credit for the income recipient for the tax year or a fraction of the tax year the income becomes payable.

E.4.

Special Provisions

Please note that in withholding tax on remunerations/income received by event participants, the type of remuneration/income provided must be taken into account. If the income or remuneration received by the event participant is in the form of a lottery prize, the lottery prize is not subject to Article 21 Withholding Tax. The lottery prize obtained by the event participant must be subject to Article 4 paragraph (2) Withholding Tax on lottery prizes.

Prizes that are included in the Article 21 Income Tax objects are prizes or awards received by event participants due to activities or competitions. Thus, if the prize is in the form of a 'lottery’, the income is not included in the Article 21 Income Tax objects.

F. Case Illustration

Case 1

Cahya is a swimming athlete who resides in Bandung, West Java. In March 2024, Cahya has the opportunity to participate in a national-level swimming competition organised by PT Sport Jaya. In the competition, Cahya becomes an event participant in the women’s individual swimming. As a result of the activity, Cahya wins 1st place and is entitled to receive money of IDR80,000,000.

Calculate how much Article 21 Withholding Tax must be performed on the remuneration derived by Cahya!

Answer:

Known facts:

(i)

The remuneration received is IDR80,000,000

(ii)

The remuneration is derived from the participation in an activity (event participant)

(iii)

The calculation uses the rates under Article 17 paragraph (1) subparagraph a

The following is the calculation of Article 21 Income Tax on the remuneration received by Cahya:

Article 21 Income Tax	=	(5% x IDR60,000,000) + (15% x IDR20,000,000)
	=	IDR3,000,000 + IDR3,000,000
	=	IDR6,000,000

Based on this calculation, the amount of Article 21 Withholding Tax that must be performed by PT Sport Jaya amounts to IDR6,000,000. Further, PT Sport Jaya is required to prepare a withholding receipt and submit the withholding tax receipt to Cahya.

Cahya as a taxpayer must file the income she receives from PT Sport Jaya in the 2024 annual tax return (SPT). The withholding tax performed by PT Sport Jaya may be used as a credit in the 2024 annual tax return.

Case 2

Thofan is a staff member of PT Intan. To date, Thofan has been working for 2 years and has been designated as a permanent employee. Thofan is unmarried and has no dependants. The monthly salary Thofan receives amounts to IDR6,000,000.

In February 2024, Thofan participates in the Active Worker Innovation competition organised by PT Intan in the context of PT Intan’s 8^th Anniversary. Based on the results of the competition, Thofan wins 3^rd place and is entitled to receive a cash prize of IDR3,000,000 from PT Intan.

Calculate how much Article 21 Withholding Tax must be performed by PT Intan on Thofan’s income derived in February 2024!

Answer:

Known facts:

(i)	Thofan’s Salary	=	IDR	6,000,000
(ii)	Income as an Event Participant	=	IDR	3,000,000
(iii)	Total Income in February	=	IDR	9,000,000
(iv)	Tofan’s status is a permanent employee of PT Intan with PTKP TK/0, thereby, the income is aggregated with the amount of income that month.
(v)	Pursuant to Gov. Reg. 58/2023, the amount of income received by Thofan in February is included in category A with an Article 21 Income Tax rate of 1.75%.

The following is the calculation of Article 21 Income Tax on the income received by Thofan in February 2024:

Article 21 Income Tax	=	(IDR6,000,000 + IDR3,000,000) x 1.75%
	=	IDR9.000.000 x 1.75%
	=	IDR157.500

Based on the above calculation, PT Intan is required to perform Article 21 Withholding Tax on all income received by Thofan in February. Further, PT Intan is required to prepare a withholding receipt and provide Thofan with the withholding receipt.