Answer Summary
Article 23 Income Tax deductions made by the party paying the income can be made at the end of the month in which the Income is paid, provided for the Income to be paid, or when the payment of the income in question is due. Meanwhile, the time limit for crediting the PPh Article 23 withholding receipt in the Annual Corporate Income Tax SPT is in the tax year withholding PPh Article 23 according to the date of the withholding receipt.
Complete Discussion
Thank you Mr/Mrs Mardiani for your question. Income Tax (PPh) Article 23 is a tax withheld on income in the form of dividends, interest, royalties, rent, gifts and awards, as well as compensation for services. As regulated in Article 15 of Government Regulation no. 94 of 2010 (“PP-94/2010”) which has been amended by Government Regulation no. 9 of 2021 (“PP-9/2021”), withholding of PPh Article 23 carried out by the party paying the income can be done at:
a. At the end of the month the income is paid,
b. provided for payment of Income, or
c. the due date for payment of the relevant income.
The party withholding PPh Article 23 is obliged to provide proof of withholding of PPh Article 23 to the income recipient. This withholding proof is used as valid evidence to credit Article 23 Income Tax which has been withheld in the Annual Corporate Income Tax Return (SPT).
Article 23 Income Tax credit stated in the withholding receipt can be credited in the relevant tax year as regulated in Article 28 paragraph (1) of Law no. 7 of 1983 concerning Income Tax s.t.d.t.d. UU no. 7 of 2021 concerning Harmonization of Tax Regulations (“Income Tax Law”). Article 28 paragraph (1) of the Income Tax Law reads:
“For domestic taxpayers and permanent establishments, the tax payable is reduced by tax credits for the relevant tax year, in the form of:
a. withholding tax on income from work, services and activities as intended in Article 21;
b. collection of tax on income from activities in the import sector or business activities in other fields as intended in Article 22;
c. withholding tax on income in the form of dividends, interest, royalties, rent, gifts and awards, and compensation for services as intended in Article 23;
d. taxes paid or payable on income from abroad which may be credited as intended in Article 24;
e. payments made by the Taxpayer himself as intended in Article 25;
f. withholding tax on income as intended in Article 26 paragraph (5).”
For example, if a transaction is paid on 2 October 2020, proof of withholding of PPh Article 23 must be made at the end of October 2020. This proof of withholding can be used to credit PPh Article 23 against the PPh payable on the 2020 Annual Corporate Income Tax Return.
It is different if the withholding receipt for Article 23 PPh withholding is issued in a tax year that is different from the income recognition tax year, then the withholding receipt is credited in the tax year the deduction is made as regulated in Article 16 PP-94/2010. For example, the transaction was carried out in December 2020, but the withholding of PPh Article 23 was only carried out in January 2021 and the proof of withholding is dated January 2021. In this case, the crediting of PPh Article 23 is carried out in the Annual Corporate Income Tax SPT for the 2021 tax year.
Thus, it can be concluded that the time limit for crediting the PPh Article 23 withholding receipt in the Annual Corporate Income Tax SPT is in the tax year withholding PPh Article 23 according to the date of the withholding receipt.
Hopefully our explanation is helpful, thank you.
