To provide more legal certainty and equity of income tax treatment on BIK, as well as to avoid efforts to reduce the tax base, the Ministry of Finance has issued a new regulation, No. 55 of 2022 concerning income tax treatment on BIK (“PMK-66/2023”).

Some salient points taken from PMK-66/2023 are as follows:

• PMK-66 provides more clarity on the certain types of facilities that can be claimed as deductible from the employer’s gross income (deductible), so as to reduce the company’s taxable income. Various forms of facilities provided by companies can be used as tax-deductible expenses, as long as they are included as expenses to obtain, collect, and maintain income (3M). The following are the technical provisions of deductible expense:
  1. Cost of BIK that have a useful life of more than 1 (one) year shall be deducted through depreciation/amortization;
  2. Cost of BIK have a useful life of ≤ 1 (one) year shall be fully deductible in the year concerned; and
  3. Cost of BIK should be reported in the Annual Income Tax Return of the employer.
  4. Effective date:
     • Starting 01 January 2022, for employers with the 2022 financial year starting before 01 January 2022;
     • Beginning with the 2022 financial year, for employers with the 2022 financial year starting from 01 January 2022 or thereafter.

Conversely, for employees who receive BIK, the facilities become an object of Art. 21 WHT.

• PMK-66 has indeed specified in more detail the types of facilities that can be exempted from Income Tax objects as follows:
  1. Food and drinks for all workers in the workplace
     Below are further provisions on food and drinks for employees which are provided in the form of:
     1. Coupons for food and/or beverages for employees in the marketing department, transportation division, and other outside services.
        •   The coupons’ definition includes:
          1. non-monetary transaction tools to be exchanged for food/ beverage; or
          2. employer reimbursement of food/beverages expenses (reimbursement).
        • The value of the coupon that may be excluded as an Income Tax object is IDR 2 million/employee/month or the amount of expenses for food and beverage at work per employee per month, if the expenditure is greater than IDR 2 million/employee/month
        • The excess from the actual coupon value minus the coupon value that is excluded as an Income Tax object constitutes an Income Tax Object
     2. Ingredients of food and/or beverage for all employees up to a certain value limit. Exception arrangements include limitations on gifts in the context of holidays and other than holidays that are regulated in nature and/or as Benefits with certain types and/or limitations.
  2. BIK for employees who work in certain areas
     BIK provided in Certain Areas includes facilities, infrastructure, and/or facilities at work locations for employees and their families in the form of:
     1. residence, including housing;
     2. health/medical services;
     3. education;
     4. worship;
     5. transportation; and/or
     6. sports (excluding golf, motorized vehicles racing, horse racing, gliding, or automotive sports) as long as the business location of the employer obtains designation as a certain area from the Director General of Taxes.
  3. BIK that must be provided by the employer in carrying out the work
     Below are the list of BIK and/or Benefits:
     1. uniform;
     2. work safety equipment;
     3. employee shuttle service;lodging for crew members and the like; and/or
     4. BIK and/or Benefits received in the context of dealing with an endemic, pandemic, or national disaster.
  4. BIK and/or Benefits with certain of types and/or limitation
     Below are the further detail of BIK and/or Benefits:

     No	Type	Limitation
     1	Gift provided from the employer in the form of groceries, beverage ingredients, food and/or drinks in the context of religious holidays	Enjoyed by all employees
     2	Gift provided from the employer other than for religious holidays	a.Enjoyed by employees; and b.Maximum IDR 3 mio in total per employee/year
     3	Work equipment and facilities provided by employers to employees for carrying out work including computers, laptops or cell phones along with their support such as usage units and internet connections.	a.Enjoyed by employees; and b.In order to support the work/job
     4	Health and medical service facilities from the employer	a.Enjoyed by all employees; and b.Provided in the context of handling: -work accidents -work-related illness -life-saving emergencies; or -follow-up treatment as a result of work accidents and work-related illness
     5	Sports facilities from the employer excluding sports facilities for golf, horse racing, motorized boat racing, gliding and/or automotive sports	a.Enjoyed by employees; and b.Maximum IDR 1.5 mio in total per employee/year
     6	Facilities of communal residential areas	Enjoyed by all employees
     7	Residential facilities from employers whose utilization rights are held by individuals, including apartments or landed houses	a.Enjoyed by employees; and b.Maximum IDR 2 mio in total per employee/year
     8	Vehicle facilities from the employer	Enjoyed by employees who: a.Are non-shareholders b.Have average gross income in the last 12 (twelve) months of up to IDR 100 million/employee/tax year from the employer.
     9	Contribution to pension funds whose establishment has been approved by the OJK which is borne by the employer	Enjoyed by employees
     10	Religious facilities including prayer rooms, mosques, chapels or temples	Intended solely for worship activities
     11	BIK and/or Benefits received or earned in 2022	Enjoyed by employees or service providers

  5. BIK and/or Benefits obtained from government
     1. Withholding of tax on said BIK and/or Benefits is done at the end of the month when:
        a.the income concerned is transferred or becomes due, whichever event occurred first; or

        b.transfer of rights or part of the rights to the utilization of a facility and/or service by the provider for Benefits.

     2. The provisions regarding the withholding of Article 21 Income Tax on benefits in kind and
        benefits by the provider must be applied starting from 01 July 2023. However, the income received by the employee (January 2023 – June 2023 tax period) must be calculated and self-remitted as well as being reported by the recipient in the 2023 Annual Personal Income Tax Return.