DEVELOPING PAYROLL SYSTEM FOR EFFECTIVE TAX PLANNING OF INCOME TAX ART. 21 IN COMPANY SS TANGERANG UNDERGRADUATE THESIS SUBMITTED TO FULFILL PARTIAL REQUIREMENT OF BACHELOR DEGREE IN ACCOUNTING

DEVELOPING PAYROLL SYSTEM FOR EFFECTIVE TAX PLANNING OF INCOME TAX ART. 21 IN COMPANY SS TANGERANG UNDERGRADUATE THESIS SUBMITTED TO FULFILL PARTIAL REQUIREMENT OF BACHELOR DEGREE IN ACCOUNTING SUBMITTED BY: GITARANI PRASTUTI STD. ID: 040811615 TO FACULTY OF BUSINESS AND ECONOMY AIRLANGGA UNIVERSITY SURABAYA 2012

  Developing Payroll System for Effective Tax Planning of Income Tax Art. 21 in Company SS Tangerang Undergraduate Thesis Submitted to fulfill partial requirement of Bachelor Degree in

  Accounting Submitted By: GITARANI PRASTUTI STD. ID: 040811615 TO FACULTY OF BUSINESS AND ECONOMY AIRLANGGA UNIVERSITY SURABAYA 2012

  UNDERGRADUATE THESIS DEVELOPING PAYROLL SYSTEM FOR EFFECTIVE TAX PLANNING OF INCOME TAX ART. 21 IN COMPANY SS TANGERANG SUBMITTED BY: GITARANI PRASTUTI STD. ID : 040811615

HAVE BEEN ACKNOWLEDGED AND WELL ACCEPTED BY THE

COUNSELOR LECTURE, SUPERVISOR, ALFA RAHMIATI, SE.,MM.,Ak.

  AT THE DATE……………………

  HEAD OF BACHELOR OF ACCOUNTING MAJOR, Drs. AGUS WIDODO M.,MSi,.Ak.

  AT THE DATE……………………

  Surabaya,……………………………….. This thesis was complete and subject to be examined Supervisor, ALFA RAHMIATI SE., MM.,Ak.

  ACKNOWLEDGEMENTS

  In The Name of Allah, Most Gracious, Most Merciful Praise be to Allah, the Cherisher and Sustainer of the Worlds. I thank You with all of my heart, finally I finished my study which means also finish my undergraduate thesis on time. You are the one who keeps my spirit alive.

  A special recognition goes to Mr. Muslich Anshori and his associates that I can’t mention all as a Dean of Faculty of Business and Economics, Mr. Agus Widodo SE., Ak. as being my Head Accounting Department for about three and half years, Mrs. Alfa Rahmiati SE., MM., Ak. as my thesis supervisor and taxation specialization subject. You know Ma’am, I’m grateful could meet and know you, moreover having you as my supervisor. I’m having a pleasure time with you. Mrs. Amalia Rizky SE., MM., Ak. as my counselor lecturer, I thank you, with your great advice so I could develop myself well. Mrs. Devi S. Kalajanti SE., MM

  ., Ak as English Class Supervisor. Ma’am, sure I’ll be missing your kindness and your sweet smile. Lecturers who inspired me; Mr. Khusnul Prasetyo as my favorite lecturer, Professor Tjiptohadi, your experience and support are inspiring me to dare to try something new . Mrs. Debby, your words are always be remembered by me, and others that I can’t mention it all. With all of my heart thank you for all of your knowledge and support.

  The Academic Department; Dra. Luluk Djatmiko as Head of Department and partn ers that I can’t mention them all. I thank you for all of your great work.

  Love and big hugs for my family, Mom and Dad, thank you for all of your support in any form. My Granny (deceased), thank you for your love and care, .Granny and Grandpa in Bandung, thank you and I love you. My two sweet bro; Prabu and Pandu, though sometimes you’re so silly and spoilsport but hey, I miss you really! LOL

  Rahmat Rizal Alfaries, as partner of my heart, buddy, friend, and foe, thank you for being with me ‘till now and what you’ve scarified for me. We’ve shared laugh, smile, and cry together along this way.

  My buddies from 39 SHS a.k.a Galan who always on my side, Lia Septiana a.k.a Roniii!! Roniku cintaku kapan kencan lagii?? Tar kalo gw dah pulang

  ngayeng yak? . Yawan Shiffer a.k.a Korve.Pe, masih jualan akua lu??kerja keras yak!!.kasian tu si anca nungguin lo dirumah, wkwkwkwk. Thank you for making

  me and roni ROFL all the time when we see ur photo! Muhammad Nurdiansyah a.k.a Ancaaaa. Ih si bos anca kmana aje sih lo?ga pernah nongol ni kalo di tag namanya.

  Thank you buddies for being my BBF ‘till now, kangen kaliaaan. My best friend Leny Andriyani a.k.a Jeeeenk!! Remember my last message for you, will ya?. My betsie in EC, Aulia Hidayati a.k.a Auul!! Thank you Auul for everything! Hey, come to my house, will ya? Ma boarding house friends; Dina, Iis, Mutia, Mbak Risna, Rara (thx for ur help anyway! *hugs), Winda, Anita, and predecessors. My English Class friends, school friends, and others that I can’t mention them all.

  I also want to thank my internship friend; Indah, Diva, Reza, and Andreas. It’s such a pleasure to know you though we only have a short time. Ayo jeenk

  katanya mau jalan-jalan?? . Mr. Hans Aulia Utama Hasibuan as my Internship

  Supervisor at Central Bank, thank you for the great opportunity and your kindness.

  Special thanks to my sweet and nice bro in Maldives, Jaiilam and Jaishan Amir. I’m glad to know you, and sharing happiness with you. Hopefully I can go to Maldives so I could meet you! My buddy Moataz Abdel

  Aziz a.k.a “Mo”. Thaaaaaank for dropping me by often; chewing fat with you is exiting, and laughing wid yew is superb! My sister-alike Fabiola Mendoza, thank you as being my great sis in SL,wow! I heard you just moved in to NZ, congrats sis! My nice Alexandrian friend; Batie, Amy, Sara, and Mido thank you for always tagging me nice story and poem. Also Mohammed, Sultan Patel, and Taimoor Ehsan, Sundar, and others, thank you for always keep our friendship bond stronger.

  I thank peoples who are participating in the arrangement of this undergraduate thesis directly or not. I never forget the people and friends I’ve lost, or dream that have faded.

  Last but not least, The researcher also wants to apologize of there is any mistake or undesired words created in this undergraduate thesis.

  th

  Surabaya, February 25 2012 Researcher

  Statement of Declaration

  I, (Gitarani Prastuti, 040811615), declare that: 1.

  My thesis is genuine and truly my own creation, and is not another’s person work made under my name, nor a piracy or plagiarism. This thesis has never been submitted to obtain an academic degree in Airlangga University or in any other universities/colleges.

  2. This thesis doesn’t contains any work or opinion written or published by anyone , unless clearly acknowledged or referred to by quoting the author’s name and stated in the References.

  3. This statement is true; if on the future this statement is proven to be dishonest and fraud, I agree to receive an academic sanction in the form of removal of the degree obtained through this thesis, and other sanctions in accordance with the prevailing norms and regulations in Airlangga University.

  Surabaya,……………………………..

  Declared By, Gitarani Prastuti, Std. ID. 040811615

  ABSTRACT

  Tax planning for income tax art.21 is an alternative way to reduce tax payable in a good manner. It could perform well if supported by a good payroll system. A good system is required to perform an effective and efficient business process, such as reduce paper redundancy and saving time, and reduce human error.

  Company SS desires to perform business expansion in 2012. Hence, the company should prepare a good system and sufficient funds. To do so, Company SS wants to perform an effective tax planning in this part which is for income tax art.21 collected from its’ employees that could create higher return for both company and employees. To perform it smoothly, Company SS also supported by developing its’ current payroll system to support business expansion and its’ taxation for payroll system.

  Keywords: Tax Planning, Income Tax Art. 21, Payroll System

  TABLE OF CONTENTS COVER APPROVAL LETTER ACKNOWLEDGEMENT ABSTRACT CONTENTS TABLE LIST FIGURE LIST ATTACHMENTS CHAPTER I : INTRODUCTION………………………..…….

  1.5 Systematic Writing Proposal…………………………..

  6

  5

  2.1.1 Tax…………………………….…………….….......

  5

  2.1 Underlying Theories……………………………………

  5

  3 CHAPTER II : LITERATURE REVIEW……………………..

  3

  1

  1.4 Contributions…………………………………………..

  2

  1.3 Research Motivation…………………………………..

  2

  1.2 Formulation of Problem……………………………….

  1

  1.1 Background…………………………………………….

2.1.2 Income Tax…………………………………..…….

  6 2.1.2.1 Income Tax Art.21……………………….

  7 2.1.2.2 Income Tax Art.21 Subject……………….

  9 2.1.2.3 Income Tax Art.21 Object………………..

  2.1.2.4 Non-

  12 Taxable Income……………………..

  13 2.1.2.5 Taxable Income…………………………..

  2.1.2.6 Calculation of Income Tax Art.21 and

  17 Income Tax Bracket…………………….

  18 2.1.3 Tax Collection System…………………….

  19 2.1.3.1 Official Assessment System…….

  19 2.1.3.2 Self Assessment System………...

  19 2.1.3.3 Withholding System……………..

  2.1.3.3.1 Income Tax Art.21

  26 Withholder……………

  26 2.1.4 Additional Laws to Income Tax Art.21…..

  27 2.1.5 Tax Planning……………………………...

  30 2.1.5.1 Tax Planning Framework……….

  31 2.1.5.2 Tax Management………………..

2.2 System, Data and Informa

  33 tion……………………….

  34 2.2.1 Accounting Information System………………...

  35

  2.2.2 Data Flow Diagram………………………………

  36

  2.2.3 Flowchart…………………………………………

  36 2.2.4 Payroll and Payroll System……………………...

  2.2

  38 .5 System Development……………………………

  2.2.5.1

  39 System Planning…………………………… 2.2.5.

  39

2 System Analysis……………………………

  2.2.5.3 Sys 41 tem Design…………………………........

  2.2.5.4 System

  42 Implementation………………........

  2.2 42 .6 Software………………………………………….

  2.3 P 43 revious Research…………………………………….

  45 CHAPTER III…………………………………………………..

  3.1

  45 Research Approach…………………………………..

  3.2

  45 Research Scope……………………………………….

  46 3.3. Data Type and Source……………………………….

  3.4 Data Col 46 lecting Procedure…………………………..

  3.5 An 48 alysis Technique………………………………….. CHA

  51 PTER IV………………………………………….………..

  57

  4.1 General View of Research Subject……………..………

  57 4.1.1 History of Company SS……………………………..

  58 4.1.2 Organizational Structure of Company SS……….….

  60

  4.2 Research Result…………………………………………

  4.2.1 Research Result through Existing Procedure of Income Tax Art.21 Collection

  60 ………

  62 4.2.2 Existing Company’s Payroll Policy………………..

  63

  4.2.3 Existing Payroll System……………………………

  71

  4.2.4 Research Result Description………………………

  4.2.4.1 Research Result through Withholding Method

  71

  72 4.2.4.2 Research Result through Company Policy…..

  73 4.2.4.3 Research Result through Payroll System…….

  75 4.3 Research Solution……………………………………….

  4.3.1 Recommendation through Procedure of Inco

  75 me Tax Art.21………………………………..

  81 4.3.2 Recommendation through Company Policy…….

  83 4.3.3 Recommendation through Company System…... .

  96 CHAPTER V………………………………………………………

  5.1

  96 Conclusion……………………………………………… .

  97 5.2 Recommendation………………………………………..

  98 REFERENCES………………………………………………….... 100 ATTACHMENTS…………………………………………………

  100 Salary Expense Recapitulation in 2010……………………. 101 Salary Expense Recapitulation in December 2010………... Recapitulation of Income Tax Art.21 Expense

  For Permanent Employees 102 in 2010………………………. Recapitulation of Income Tax Art.21 Payable

  For Permanent Employees 103 in 2010……………..………. Recapitulation of Income Tax Art.21 Payable

  For Permanent Employees 103 in December 2010…………. Recapitulation of Wage Expense in 104 2010………………….

  105 Recapitulation of Income Tax Expense in 2010………….. Application of Gross-Up Method for Permanent Employee

  106 In 2010…………………………………………………... Application of Gross-Up Method for Permanent Employee In December 2010………………………………………...

  107 Calculation of Tax Allowance for Permanent Employee in 2010…………………………………………………..

  108 Calculation of Tax Allowance for Permanent Employee in December 2010……...………………………………..

  109 List of Tax Allowance for Non-Permanent Employee in 20

  10…………………………………………………..

  110 Recapitulation of Wage Expense by Gross-Up Method and Fringe Benefit for Non-

  Permanent Employees…….

  111 Interview List………………………………………………... 112

  Company Letter of Approval……………………………… 133

• – Input / Output Symbols…………………………

• – Processing Flowchart……………………………

• – List of Storage Symbols…………………………

• – Flow and Miscellaneous Symbol…………..……

  43 Figure 2.10

  72 Figure 4.9

  72 Figure 4.8

  71 Figure 4.7

  70 Figure 4.6

  63 Figure 4.5 – Salary Expense Recapitulation………………….

  50 Figure 4.2 – Company SS Policies through Payroll………….

  45 Figure 2.11

  Income Tax Art.21 Method……………..………

  41 Figure 2.9

  41 Figure 2.8 – Tax Allowance Formula………………………..

  38 Figure 2.7 – Gross Up Calculation….......................................

  33 Figure 2.6 – Taxable Income Layer………………………….

  13 Figure 2.5

– List of Non-taxable Income………………….…..

  12 Figure 2.4

  11 Figure 2.3

  10 Figure 2.2

  TABLE LISTS Figure 2.1

• – Evaluation of Net, Gross, and Gross-up Method of Income Tax Art.21………………………….….

• – Evaluation of Comprehensive Income for each

• – General Framework of Tax Planning…………

• – Salary Expense in December 2010………………

• – Recapitulation of Income Tax Expense for Permanent Employee………………………...
• – Recapitulation of Income Tax Expense for Permanent Employee in December 2010…….

  74

• – Wage Expense Recapitulation in 2010……………

• – Recapitulation of Income tax Art.21 Expense for

• – Proposed Company Policies through Payroll for Permanent Employees……………………….
• – Recapitulation of Gross-Up Method for Permanent Employees…………………………..

• – Recapitulation of Income Tax Art. 21
• – List of Tax Allowance – Non-permanent Employee
• – Statement of Comprehensive Income after Recommendation………………………………….
• – Evaluation through After Tax Income, Take Home Pay, and Disbursement……………….

  Figure 4.24

  102

  Figure 4.23

  101

Figure 4.22 – Recapitulation of Wages………………………….

  100

  99 Figure 4.21

  97 Figure 4.20 – Recapitulation of Meals Expense………………...

  Allowance For Permanent Employees…………..

  96 Figure 4.19 - Recapitulation of Income Tax Art. 21 Allowance For Permanent Employees for December 2010…………………………………..

  95 Figure 4.18

  94 Figure 4.17 - Recapitulation of Gross-Up Method for Permanent Employees in December 2010………

  83 Figure 4.16

  82 Figure 4.13 - Proposed Company Policies through Payroll for Non Permanent Employees………………….

  76 Figure 4.12

  75 Figure 4.11 – Company’s Comprehensive Income in 2010…….

  Non- permanent Employees……………………..

  Figure 4.10

  103

  FIGURE LISTS Figure 3.1 – Conceptual Thinking…………………………..

  59 Figure 4.1 – Organizational Structure of Company SS……..

  62 Figure 4.3

• – Existing Flowchart of Payroll System for Permanent Employees……………………..

  66 Figure 4.4

• – Existing Flowchart of Payroll System

  for Non- Permanent Employees……………….

  68 Figure 4.14

• – Proposed Flowchart of Payroll System for Permanent Employees…………………….

  85 Figure 4.15

• – Proposed Flowchart of Payroll System

  for Non-Permanent Employe es……………….

  89

  CHAPTER 1 INTRODUCTION

1.1 Background

  Tax takes essential role in an economic condition of a country and becomes an obligation of the society in any kind of layer, in form of business or as individual tax payer. Society obtains facilities from government in form of public goods and services which are obtained by tax, such as public telephones, highways, bridges, etc.

  Somehow, taxes turn out become encumbers for enterprises. Reluctant or n ot, taxes imposed company’s profit, hence they obligate to pay tax. Until now and then, taxes still become big dilemma from among of them. They are willing to pay just because the regulation said so.

  Since the necessity between enterprises and government is different, enterprises are having tendencies to minimize tax. Tax planning is a treatment to minimize yearly tax payable by taking advantage in regulation’s loopholes.

  Company SS as business entity running its business in procurement goods and services. Planning for business expansion in 2012, Company SS tries to generate higher income tax return and develop its’ current payroll system and payroll policy. However, several limitations such as limited human resource becomes a big problem that should be considered why Company SS cannot develop it’s payroll system and perform tax planning well.

  Facing those facts, an adequate tax planning for income tax art.21, developing the existing system and payroll policy improvement are several keys to enhance busines s’s performance.

  1.2 Formulation of Problem

  Toward the explanation above, the formulation of problems are: 1. “What is the best tax planning treatment for permanent employees and non-permanent employees of Company SS for greater after- tax return?” 2. “How to develop payroll system of Company SS in order to establish tax planning for income tax art.21 and a good payroll policy?

  ”

  1.3 Research Motivation

  The research motivations of this proposal are following:

  1. Seek the implementation of tax planning for both permanent and non- permanent employee by considering the tax collection method applied and deductible expense based on the General Provision of Taxation Procedure.

  2. Recognize tax savings generates by company 3.

  Recognize employees’ take home pay

  4. Develop existing payroll system of Company SS that will accelerate the performance of tax planning of income tax art.21

  5. Develop existing payroll policy for both permanent and non-permanent employee

  1.4 Research Contributions

  Several contributions are made for this research stated as following:

  1. Provide information to company about the great impact on companies’ after- tax return by the implementation of tax planning for company in treating tax art. 21 and give recommendation for improvement and corrective actions for its’ current payroll system and payroll policy

  2. Give practical knowledge about the implementation of tax planning in field and payroll system development

  3. As the reference for the next research within this field of research of the importance of tax planning and adequate payroll system particularly for income tax art.21

  1.5 Systematic Writing Proposal

  To make research become easier to understood, this research divide to some chapter consist of subchapter arranged systematically as follow:

  CHAPTER I : INTRODUCTION This chapter depicts the background of the problem, formulation of problem, research objective, research contribution, and systematic writing proposal. In short, chapter 1 describes the reason why having good payroll system is important before the company arranges tax planning of income tax art.21. To advance tax planning, the company must know the appropriate regulation and maintain the changing in order to run it well.

  CHAPTER II : THEORETICAL REVIEW This chapter contains underlying theories of payroll system, such as system planning, analysis, implementation and tax regulations. CHAPTER III : RESEARCH METHODOLOGY This chapter describes about the type of research, scope of research, types and source of data used, data collecting procedure, and technical analysis used.

  CHAPTER IV: RESEARCH RESULT AND DISCUSSION This chapter focuses on research result obtained from the research and observation done in Company SS in form of company’s general view, and continues with description of research result, discussion and evaluation.

  CHAPTER V : CONCLUSION AND RECOMMENDATION This chapter contains of conclusion and the further recommendations that might be advantageous for enterprise which derived from the research. Literature also included on this chapter.

  CHAPTER 2 LITERATURE REVIEW

2.1 Underlying Theories

2.1.1 Tax

  Tax is an obligation of society in any kind of layer. Almost all business activities can’t be separated from taxes and tax regulation. Thus, we need to completely understand tax regulation. Several tax expertise define term of tax; one of them is Prof. Dr. H. Rohmat Soemitro (Zain 2007:11) stated the term of tax as following:

  “Tax is the conversion of public’s wealth to government’s inflow for regular expenditures while its surplus are used to public saving that as the main source to afford public investment” Hence, we can conclude the criteria that related to the definition of tax are:

  a. Collected by government, in this case represented by central or regional government where the collection is based on the amendment.

  b. Utilize in affording government activities and expansion to provide public welfare.

  c. Contribution to government that able to insisted, means if the tax payer is negligent due to his/her obligation, then it’s able to claimed by force through warning letter or compulsion letter.

  d. As the regulation and budgetary function.

  The budgetary function means tax becoming one of nation’s inflows to afford the government activities and expansion. The budgetary function must be consistent with the regulated one; to regulate or establish social and economic policies in case to accelerate the establishment of social thriving. Such as regulate or limiting the society’s consumption, doing the income redistribution, giving incentives to the economic growth and investment, and others.

  From business perspective, tax is a burden. Entrepreneurs will treat taxes as an unavoidable business reality. Those kind of impact means somewhat important, so that taxes is a components which must have a serious supervision, and beco ming factor which decide businesses’ flow.

2.1.2 Income Tax

  As stated in the fourth amendment to the law number 7 year 1983 regarding income tax (law number 36/2008), income is which is any increase in economic capability received or accrued by taxpayer, whether originating from Indonesia and outside Indonesia, which can be used for consumption or to increase the wealth of taxpayer, with the name and in whatever form.

2.1.2.1 Income Tax Art. 21

  As stated in art. 1 no. 1 Kepdirjen No. KEP-545/PJ./2000 , term of income tax art.21 is a tax on income in the form of salaries, wages, honoraria, allowances, and other payments received or accrued by an individual taxpayer in the country in connection with a job or position, services, and activities. Several underlying regulation related to the implementation of income tax art. 21 are stated as following:

  1. The Fourth Amendment to the Law Number 7 Year 1983 Regarding Income Tax (Law Number 36/2008) of general provisions of taxation procedures.

  2. Regulation of the minister of finance number 254/PMK.03/2008 about stipulation of part of income with respect to work of daily and weekly workers as well as other non-permanent workers not subject to the withholding of income tax

  3. Government regulation of Indonesia Republic no. 94 year of 2010 regarding government regulations regarding the calculation of taxable income and income tax payment in certain period.

2.1.2.2 Income Tax Art.21 Subject

  As stated in the fourth amendment to the law number 7 year 1983 regarding income tax (law number 36/2008), income recipient who withheld income tax art. 21 are stated as following:

  1. State officials including president, vice president, parliaments / assemblies consent of the governed, the local legislative provincial / city / district, supreme audit board, supreme court, supreme board consideration, the minister of state / young, attorney general, governor, regent, and mayor.

  2. Civil employees, is central civil employees, regional civil employees, and others civil employees which regulated by government regulation in constitution no. 8 year of 1974.

  3. Employees, is any person, who is doing work under contract or employment agreement either written or not, including those doing job in the country or state owned enterprises or enterprises owned by region.

  4. Permanent employees, is an individual who works to the employer, who receive or earn salary in certain amount at regular intervals, including members of the board of commissioners and the supervisory board which regularly and continuously participate in managing company's activities directly

  5. Foreign employees, is an individual who does not reside in Indonesia not later than 183 days within a period of 12 months who receive or earn salary, honoraria and / or other compensation with respect to employment, services, and activities.

  6. Irregular employees, is personal taxpayer who receive salary if only they work.

  7. Pension Recipients, is an individual or their heirs who receive or obtain compensation for work performed in the past, including persons or their heirs who receive retirement savings or retirement allowance.

  8. Recipients of honoraria, is individuals who receive or obtain compensation in connection with position, or related activities done by them.

  9. Recipients of wage, individuals who receive daily wages, weekly wages, intact wages, or single wages.

  Person or statutory bodies that are excluding as income tax art.21 subject are stated as following:

  1. Diplomatic representatives and consular officers or other officials of foreign countries, and those who had been told they are working on and living with them, provided that:

  a. Not Citizen Indonesia

  b. Not receive or earn other income from outside the office in Indonesia

  c. State concerned to give reciprocal treatment

  2. Official representatives of international organizations as referred to in the decision of finance ministers 576/KMK.04/2000 number as last amended by the finance minister's decision 601/KMK.03/2005 numbers along a. Not a citizen of Indonesia.

  b. Not engaged in business or activity or other work to earn income in Indonesia.

2.1.2.3 Income Tax Art. 21 Objects

  Several income imposed by withholding tax art. 21 are stated as following:

  a. Income received or accrued by an employee or a regular pension recipients in the form of salary, monthly pensions, wages, honoraria (including honoraria by the commissioners or members of the board of trustees), monthly premiums, overtime pay, dole, waiting for money, compensation, benefits, wife, child allowances, allowances for overpriced, office allowances, special allowances, transport allowances, tax allowances, pension benefits, children's education allowances, scholarships, insurance premiums paid by employers, and other regular income by any name; b. Income received or accrued by employees, former employees receiving retirement or irregularly in the form of production services, bonuses, gratuities, leave allowances, holiday allowances, allowances for the new year, bonuses, annual premiums, and other similar income who are not permanent;

  c. Daily wages, weekly wages, unit wage and piece rate received or obtained by temporary employees or freelance workers, as well as pocket money daily or weekly participants received education, training or apprenticeship which is a candidate for officer.

  d. Ransom retirement, saving for old age or Old Age Security, severance pay and other similar payments in connection with termination of employment; e. Honorarium, allowance, gift or award with the name and in whatever form, commissions, scholarships, and other payments as benefits relating to employment, services, and activities undertaken by individual taxpayers in the country, consisting of:

  1. Professionals (Lawyers, Accountants, Architects, Doctors, Consultants, Notary, Appraisers, and Actuaries).

  2. Musicians, emcee, singer, comedian, movie star, the star of soap operas, commercials, director, film crew, photo model, the player plays, dancers, sculptors, painters and other artists;

  3. Athlete;

  4. Advisers, teachers, coaches, preachers, counselors, and the moderator;

  5. Author, researcher, and translator;

  6. Service providers in all areas including engineering, computer and application systems, telecommunications, electronics, photography, economic and social;

  7. Advertising agencies;

  8. Supervisors, project managers, members and providers of services to a committee, and participants of the hearing or meeting;

  9. Bearer of the order or who finds a subscription;

  10. Participants of the race;

  11. Official merchandise vendors;

  12. Foreign service officers insurance;

  13. Participant education, training and apprenticeship are not employed or not as a prospective employee;

  14. Multilevel marketing companies or distributors of direct selling and other similar activities.

  15. Wages, salaries of honor, other benefits related to salary and remuneration or other benefits received are not fixed by the State Officers, Civil Servants and pensions and other benefits that are related to pensions received by retirees including widow or widower and / or their children. Excluding the income tax collection of Article 21 are stated below:

1. Insurance payments from the company's health insurance, accident insurance,

  life insurance, endowment insurance, and scholarship insurance;

  2. Receipts in kind and enjoyment in any form provided by the taxpayer or the

  Government, not the exception granted by the Government other than the taxpayer or the taxpayer who is subject to final income tax and income tax imposed by a special calculating norms (deemed profit).

  3. Pension contributions paid to pension funds that establishment has been

  approved by the Minister of Finance and Old Age Security contributions to the body administering Social Security paid by the employer,

  4. Alms received by an individual who has the right of the agency or institution of Zakat established or approved by the Government.

  5. Scholarships that meet certain requirements (art. 3 (1) Income Tax Act).

  Provisions are set further in the Regulation of the Minister of Finance No. 246/PMK.03/2008

2.1.2.4 Non-Taxable Income

  Based on the regulation of Director General of Taxation PER-31/PJ/2009, non-taxable Income (NTI) is the limit of income for employee which is imposed to income tax. Amount of NTI depends on the marital status and dependants of employee started in the beginning of tax year. The calculation of NTI for personal taxpayer stated on The Fourth Amendment to the Law Number 7 Year 1983 Regarding Income Tax (Law Number 36/2008) are stated on the next page:

Figure 2.1 List of Non-taxable Income (NTI) Status Monthly Yearly

  Single with no dependants (S/0)

  IDR 1,320,000

  IDR 15,840,000 Married with no dependants (M/0)

  IDR 1,430,000

  IDR 17,160,000 Married with one dependant (M/1)

  IDR 1,540,000

  IDR 18,480,000 Married with two dependants (M/2)

  IDR 1,650,000

  IDR 19,800,000 Married with three dependants (M/3)

  IDR 1,760,000

  IDR 21,120,000 Source: The Fourth Amendment to the Law Number 7 Year 1983 Regarding

  Income Tax (Law Number 36/2008)

2.1.2.5 Taxable Income

  As stated in The Fourth Amendment to the Law Number 7 Year 1983 Regarding Income Tax (Law Number 36/2008), taxable income (TI) is a base of calculation to determine art. 21 payable received by personal taxpayer for a year.

  For resident taxpayer, there are two way in determining taxable income (TI); bookkeeping and norm. To determine the amount of the taxable income of a resident taxpayer and a permanent establishment, these shall remain non deductible: a. Profit share by any name and in any form whatsoever, such as dividend, including dividend paid by an insurance company to a policy holder, and share of the remainder of business profit of a cooperative;

  b. Cost incurred or expended for any personal interest of shareholder, partner, or member; c. The formation or accumulation or reserve funds, except:

  1. Uncollectible receivables reserve for a bank business and other business entity distributing credit, optional leasing consumer financing company and factoring company;

  2. Reserve for insurance business, including social assistance reserve formed by the operating board of social security;

  3. Guaranty reserve for deposit underwriting institution;

  4. Reclamation cost reserve for a mining business;

  5. Re-investment cost reserve for forestry business; and

  6. Reserve of cost of closure and maintenance of industrial waste disposal place for waste treatment industry with the provision and requirements thereof stipulated by or on the basis of a regulation of the Minister of Finance; d. Health insurance premium, accident insurance, life insurance, dual benefit insurance, and scholarship insurance, paid by the taxpayer individual person, except if paid by an employer and the premium is calculated as income for the relevant taxpayer.

  e. Reimbursement or reward in connection with work or service given in kind and benefit, except the provision of food and beverage for all employees and also reimbursement or reward in kind and benefit in certain regions and which is related with the execution of work stipulated by or on the basis of a regulation of the Minister of Finance; f. The sum which exceeds fairness which is paid to a shareholder or to a party having special relationship as reward in connection with work done;

  g. Wealth which is granted, assistance or contribution, and inheritance as intended in art.4 paragraph (3) letter a and letter b, except the donation as well as zakat (religious charity) received amil zakat agency or institution established or legalized by the government or compulsory religious donation of followers of religions recognized in Indonesia, which is amil

  zakat (charity) organization or amil zakat institution set up and legalized