Import Article 22 Income Tax Rates: What They Are and an In-Depth Look

For a deeper understanding of the provisions on Article 22 Income Tax (PPh 22) rates, let’s take a look at the following explanation.

The Minister of Finance has the authority to determine several matters related to Article 22 Income Tax, namely:

• Appoint government treasurers as Article 22 Income Tax collectors for payments for the delivery of goods.
• Appoint certain entities as Article 22 Income Tax collectors from taxpayers engaged in import activities or business activities in other sectors.
• Appoint certain corporate taxpayers as Article 22 Income Tax collectors from buyers purchasing goods classified as very luxurious.

According to the explanation in Article 22 of the Income Tax Law, the following parties may be appointed as tax collectors:

1. Government treasurers, including treasurers at the Central Government, Regional Governments, government agencies or institutions, and other state institutions, in connection with payments for the delivery of goods. The term “treasurer” also includes cashiers and other officials with similar functions.
2. Certain entities, both government and private, in connection with activities in the import sector or business activities in other sectors, such as the automotive, cement, and steel industries.
3. Certain corporate taxpayers to collect tax from buyers purchasing goods classified as very luxurious. This tax is levied on the purchase of certain goods that meet the criteria for being classified as very luxurious, based on either their type or price, such as yachts, luxury homes, luxury apartments, luxury condominiums, and luxury vehicles.
4. The Article 22 Income Tax levy imposed on taxpayers without a Taxpayer Identification Number (NPWP) is 100% higher than the rate applied to taxpayers who can provide an NPWP.

Tax Collectors Under Article 22 Income Tax

The following are the PPh Article 22 collectors:

1. Foreign exchange banks and the Directorate General of Customs and Excise (DJBC) are responsible for collecting Article 22 Income Tax on imported goods.
2. Government Treasurers and Budget User Authorities (KPA) act as tax collectors for the Central Government, Regional Governments, government agencies or institutions, and other state institutions in connection with payments for the purchase of goods.
3. Expenditure treasurers, in connection with payments for the purchase of goods made through the imprest fund (UP) mechanism.
4. The KPA or the official authorized to issue a Payment Order, as delegated by the KPA, in connection with payments to third parties for the purchase of goods made through the direct payment (LS) mechanism.
5. State-Owned Enterprises (SOEs) such as PT Pertamina (Persero), PT Perusahaan Listrik Negara (Persero), PT Perusahaan Gas Negara (Persero) Tbk., PT Telekomunikasi Indonesia (Persero) Tbk., PT Garuda Indonesia (Persero) Tbk., PT Pembangunan Perumahan (Persero) Tbk., PT Wijaya Karya (Persero) Tbk., PT Adhi Karya (Persero) Tbk., PT Hutama Karya (Persero), PT Krakatau Steel (Persero).
6. State-owned banks, in connection with payments for the purchase of goods and materials for their business operations.
7. Industries and exporters operating in the forestry, plantation, agriculture, livestock, and fisheries sectors that purchase materials from collecting traders for industrial or export purposes.
8. Industries or business entities that purchase coal, metallic minerals, and non-metallic minerals from entities or individuals holding mining business licenses.
9. Corporate taxpayers or private companies required to collect Article 22 Income Tax on sales include businesses in the cement, paper, steel, automotive, and pharmaceutical industries, when selling their products to domestic distributors, ATPM, APM, general importers of motor vehicles, producers or importers of fuel, gas, and lubricants, as well as steel industry businesses that are part of the upstream industry.
10. Minister of Finance Regulation No. 90/PMK.03/2015 added corporate taxpayers selling goods classified as luxury goods to the list of Article 22 income tax collectors.

PPh Article 22 Import Rates

Article 22 income tax rates vary depending on the type of transaction, as follows:

• Imports of goods using an Importer Identification Number (API) are taxed at 2.5% x the import value. Imports without an API are taxed at 7.5% x the import value. Goods under customs control are taxed at 7.5% x the auction sale price.
• Purchases of goods by government treasurers, KPA, expenditure treasurers, or officials authorized to issue payment orders are taxed at 1.5% x the purchase price (excluding VAT; non-final).
• Sales of manufactured products or deliveries of goods by industrial business entities, such as those in the paper, cement, steel, automotive, and pharmaceutical industries, as well as domestic sales of motor vehicles by ATPM, APM, and general motor vehicle importers, are taxed at rates set by a Decree of the Director General of Taxes. These rates range from 0.1% to 0.45% x the VAT tax base (non-final), depending on the type of industry.
• Sales of fuel oil, gas fuel, and lubricants are taxed at rates determined when the delivery order is issued.
• Purchases of materials from collecting traders for industrial or export purposes are taxed at 0.25% x the purchase price (excluding VAT).
• Imports of soybeans, wheat, and wheat flour by importers using an API are taxed at 0.5% x the import value.
• Sales of luxury goods such as private aircraft, yachts, luxury homes, apartments, condominiums, and luxury vehicles are subject to specific rates.

In practice, Article 22 income tax withholding is non-final, except for sales of fuel oil, gas fuel, and lubricants by producers or importers of fuel oil, gas, and lubricants to distributors/agents.

Certain activities or transactions are exempt from Article 22 income tax withholding, including imports of goods not subject to income tax, imports of goods exempt from import duties and/or VAT, temporary imports intended for re-export, re-imports, and payments for the delivery of goods charged to state/regional expenditure in amounts of less than Rp 2.000.000,-.

Article 22 income tax is collected by having the tax collector deposit the tax into the state treasury through a post office, foreign exchange bank, or bank appointed by the Minister of Finance. The Directorate General of Customs and Excise and the tax collector report the amounts collected to the Tax Service Office using a Periodic Tax Return.

All Article 22 income tax collected is non-final and can be credited against income tax payments for the current tax year by the taxpayer subject to collection, except for sales of fuel oil, gas fuel, and lubricants by producers or importers of fuel oil, gas, and lubricants to distributors or agents.

This concludes the explanation of the provisions on PPh 22 Import Rates.

Source:

PPh Article 22 | Directorate General of Taxes