A. Legal Basis

The legal sources underlying these tax guidelines are as follows:

(i)

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

(ii)

Law Number 4 of 2019 concerning Midwifery (Law 4/2019);

(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);

(iv)

Minister of Finance Regulation Number 66 of 2023 concerning the Income Tax Treatment of Reimbursements or Remunerations in Respect of Employment or Services Received or Accrued in the Form of In-Kind and/or Fringe Benefits (MoF Reg. 66/2023);

(v)

Minister of Finance Regulation Number 54/PMK.03/2021 concerning Procedures for Recording and Certain Criteria as Well as Procedures for Bookkeeping for Tax Purposes (MoF Reg. 54/2021);

(vi)

Director General of Taxes Regulation Number PER-2/PJ/2024 concerning Guidelines for the Implementation of Tax Withholding on Income in Connection with Employment, Services or Activities of Individuals (PER2/2024); and

(vii)

Director General Taxes of Regulation Number PER-16/PJ/2016 concerning Technical Guidelines for Procedures for the Withholding, Remittance and Filing of Article 21 Income Tax and/or Article 26 Income Tax in Respect of the Employment, Services and Activities of Individuals (PER-16/2016).

B. Definition and Duties

Referring to Law 4/2019, Midwifery is all matters related to midwives in providing midwifery services to women. These services include pre-pregnancy, pregnancy, childbirth, postpartum, puerperium, newborns, infants, toddlers and preschoolers, including women’s reproductive health and family planning according to their duties and authorities.

In this case, a midwife is a woman who has completed a midwifery education programme, either domestically or overseas, that is legally recognised by the Central Government and has fulfilled the requirements to practice Midwifery. In implementing midwifery practice, a midwife has the following duties:

(i)

maternal health services;

(ii)

child health services;

(iii)

women’s reproductive health and family planning services;

(iv)

the implementation of duties based on the delegation of authority; and/or

(v)

the implementation of duties in certain limited circumstances.

C. Midwife's Rights in the Scope of Taxes

In the scope of taxation, a midwife may be categorised as a taxpayer (Wajib Pajak/WP in Indonesian), thereby, has rights protected by tax laws and regulations. A midwife’s rights within the scope of taxes include:

(i)

A midwife has the right to obtain information related to tax obligations from tax officers;

(ii)

A midwife has the right to receive withholding receipts in the form of Article 21 Income Tax Returns (Surat Pemberitahuan/SPT in Indonesian) in each taxable period from the employer;

(iii)

A midwife has the right to receive withholding receipts for her Article 21 Income Tax Annual Tax Returns from the employer;

(iv)

A midwife has the right to amend the tax return if there are errors in writing or calculation;

(v)

A midwife has the right to a reduction in personal tax relief (Penghasilan Tidak Kena Pajak/PTKP in Indonesian);

(vi)

A midwife has the right to file legal remedies in the form of objections, appeals or civil reviews;

(vii)

A midwife has the right to confidentiality of taxpayer data;

(viii)

A midwife has the right to obtain tax incentives pursuant to the applicable statutory tax provisions.

D. Midwife's Obligations in the Scope of Taxes

In addition to having rights, there are obligations that must be fulfilled by a taxpayer who works as a midwife. These obligations include:

(i)

A midwife who has fulfilled the objective and subjective requirements as a taxpayer is required to register to obtain a Taxpayer Identification Number (TIN) and/or activate their national identification number as the TIN, to obtain the TIN, the application may be submitted online or visiting the Tax Office (Kantor Pelayanan Pajak/KPP in Indonesian) in person;

(ii)

A midwife as a taxpayer is required to retain the withholding receipt from the company where she works;

(iii)

A midwife is required to file the withholding tax by the employers on the income she receives in her annual report.

E. Taxable Objects

In implementing midwifery practice, a midwife may work and provide services in several places, such as hospitals, public clinics or private clinics by establishing her own practice. For the services provided, a midwife will derive income.

The ITL states that all types of additional economic capacity, including all types of income, are categories of income tax objects. Therefore, all income received by a midwife is an income tax object.

In addition, there are several types of a midwife’s income that pursuant to the ITL, may be classified as taxable income. The following is a midwife’s income that may be taxed:

(i)

income from work in an employment relationship and independent personal services in the form of honorariums, salaries, and benefits;

Income from work in an employment relationship and independent personal services which may be in the form of honorarium, salary as well as benefits;

(ii)

income from capital;

(iii)

income from the business conducted by the midwife concerned; and

(iv)

other non-regular income, for example, the acquisition of lottery prizes.

In this article, we will discuss the calculation of income tax related to income derived from service activities provided by a midwife.

F. Tax Treatment

Pursuant to the ITL, income which constitutes additional economic capacity derived by a taxpayer is included in income tax objects. Several types of income received by a midwife must be taxed. The imposition of tax on such income must comply with the applicable statutory tax provisions.

F.1.

Article 21 Income Tax Treatment in Connection with Employment

A midwife who has a definite employment contract with a hospital or clinic with a binding employment agreement may be categorised as an employee.

In practice, hospital or clinic employees, including midwives, will receive a regular salary every month for the healthcare services provided. In addition to receiving a salary, there is additional income, such as allowances, bonuses and premiums provided by the company.

In this case, the salary and benefits granted by the company may be categorised as income for a midwife. In addition, if there are in-kind or fringe benefits received by the midwife, they constitute an income tax object. The in-kind or fringe benefits must be taxed and included in the component of the midwife’s gross income.

For the income received by a midwife, the hospital or clinic where the employer is required to collect Article 21 Income Tax on the income received by the midwife.

Referring to Gov. Reg. 58/2023, the calculation of Article 21 Income Tax on a permanent employee may be calculated using the average effective tax rate (Tarif Efektif Rata-rata/TER in Indonesian). The rates are divided into category A, category B and category C. The rate category used may be selected by taking into account a midwife’s personal tax relief (Penghasilan Tidak Kena Pajak/PTKP in Indonesian) and the gross income received.

Please note that the average effective tax rate in calculating Article 21 Income Tax is used only for each period other than the December taxable period. On the other hand, in the calculation of the December Period tax, the calculation of Article 21 Income Tax is conducted using progressive rates pursuant to Article 17 paragraph (1) subparagraph a.

The following is the calculation of the monthly Article 21 Income Tax for a midwife of employee status of:

Further, to calculate Article 21 Income Tax in December or the last taxable period, the withholding agent needs to first calculate tax payable in one tax year using the rates under Article 17 paragraph (1) subparagraph a of the ITL. The following is the calculation of Article 21 Income Tax for one tax year:

The following are the rates Article 17 paragraph (1) subparagraph a pursuant to the HPP Law:

Table 1. Article 17 Income Tax Rates

Source: HPP Law

If the amount of tax payable in one tax year is known, the next step is calculating the tax payable in December with the following calculation:

F.1.1

Article 21 Income Tax Withholding, Remittance, and Reporting

The hospital or clinic that employs the midwife is required to withhold, remit and file Article 21 Income Tax. Article 21 Withholding Tax is conducted on a midwife who has income and has fulfilled the subjective and objective requirements as a taxpayer.

If Article 21 Income Tax has been withheld on the income received by the midwife, the employer is required to prepare a withholding receipt. The withholding receipt is prepared as proof that the income has been taxed in each taxable period.

After a withholding receipt is prepared, pursuant to PER-2/PJ/2024, the employer is required to provide a withholding receipt to the income recipient in each taxable period.

Further, the withholding agent is required to remit taxes no later than the 15th of the following month after the taxable period as well as file the taxes no later than the 20th of the following month after the taxable period.

F.1.2

Filing of the Annual Tax Return

At the end of the year, the employer is required to provide the annual tax return to the midwife. After receiving the annual tax return, a midwife is required to file the withholding tax by the employer.

The filing deadline for the tax return for individuals is 3 (three) months after the end of the taxable period, i.e., the end of March. Therefore, the midwife is required to file her tax return no later than the end of March.

F.1.3

Special Provisions

Since the issuance of MoF Reg. 66/2023, there has been a change in the recognition of in-kind as a taxable object. There are details of in-kind excluded from taxable objects. Details of in-excluded from taxable objects can be found in the appendix of MoF Reg. 66/2023.

In addition, to discover more details concerning the calculation of income that includes in-kind, refer to the following Perpajakan DDTC tax guidelines channel.

F.2

Income Tax in Connection with Business Activities

In the event that a midwife conducts her business activities in the form of providing healthcare services to a private clinic, the clinic must maintain bookkeeping. This does not apply to taxpayers that have a turnover of less than IDR4.8 billion.

Taxpayers with a turnover below IDR4.8 billion and are included in individual taxpayers who fulfil certain criteria are allowed to maintain recording pursuant to MoF Reg. 54/2021. Please note that that recording must be maintained according to the actual circumstances accompanied by supporting documents constituting the basis for recording.

There are differences in the calculation methods for tax payable for a midwife who maintains recording and a midwife who maintains bookkeeping. The following is the explanation.

F.2.1

Midwives Who Maintain Bookkeeping

In the case of a midwife who maintains bookkeeping, the imposition of tax is based on net income. Net income may be calculated in the following manner:

The business expenses concerned include all expenses incurred to derive, collect and maintain income (3M Expenses). After obtaining net income, the next step is calculating taxable income (Penghasilan Kena Pajak/PKP in Indonesian), with the following calculation:

After obtaining the taxable income, the next step is to calculate tax payable using the rates under Article 17 paragraph (1). The following is the calculation:

F.2.2

Midwives Who Maintain Recording

In the event that the midwife maintains recording, tax calculation may be conducted by first determining the taxable income. After obtaining taxable income, the next step is to find tax payable by multiplying the taxable income by the rates under Article 17 paragraph (1). The calculation is as follows:

G. Case illustration

1.

Mrs. Riris is a midwife who is of permanent employee status at Harapan Indah Hospital. The salary that Mrs. Riris receives every month is IDR6,000,000. In addition, in March 2024, Mrs. Riris receives overtime pay of IDR500,000. It is known that Mrs. Riris’ status is unmarried and has no dependants (TK/0).

Calculate the amount of withholding tax on the income received in March by Mrs. Riris.

Answer

Facts Known:

Monthly Salary	IDR6,000,000
Overtime Pay	IDR500,000
Total income received	IDR6,500,000
Mrs. Riris’ personal tax relief status	IDR(TK/0)

Pursuant to Gov. Rev. 58/2023, Mrs. Riris is included in category A with an Article 21 Income Tax rate of 1%. On this basis, the following is the calculation of Article 21 Income Tax on the income received by Mrs. Riris:

Article 21 Income Tax	=	1% x IDR6,500,000
	=	IDR65,000

In this calculation, it can be seen that the tax on the income in March received by Mrs. Riris is IDR65,000. The hospital is required to withhold, remit and file taxes on a regular basis pursuant to statutory tax provisions.

Further, the hospital is required to prepare a withholding receipt for the withholding tax in March and submit the withholding receipt to Mrs. Riris.