Severance Pay Tax in Indonesia: Rates, Instalments and Slips
Severance pay tax in Indonesia is a final PPh 21 on lump sums, with its own rate bands. See the rates, a worked example, instalments and who withholds.
References (7)
- PP No. 68 Tahun 2009, in force 16 November 2009. Article 1 the definitions, including severance, the employee as a resident individual and who withholds. Article 2 final PPh 21 on lump sums, and instalments within two calendar years. Articles 3 and 8 severance funds. Article 4 the severance bands. Article 5 the pension, THT and JHT bands. Article 6 payments from the third year. Article 7 the slip, even at 0%. The Elucidation to Articles 2 and 4, with the worked examples.
- PMK No. 16/PMK.03/2010, in force 16 November 2009. Articles 2 to 7 repeat the rules above for withholding; Article 2(4) the tax is due when payment is made.
- Income Tax Law, UU No. 7 Tahun 1983, Article 21(5) as amended by UU No. 36 Tahun 2008, rates set by government regulation; Article 26(1)(d), 20% on pay for work received by non-residents.
- PMK No. 168 Tahun 2023. Article 14(1) PPh 26 final or at the treaty rate; Article 22(3) and (4) final PPh 21 is not a tax credit and is reported in the annual return; Article 5(3) salary of permanent employees through the effective rate and a year-end calculation.
- PMK No. 81 Tahun 2024, in force 1 January 2025. Article 94(2)(c) and 100 payment by the 15th; Articles 171(1)(c) and 173 the monthly PPh 21/26 return within 20 days.
- PER-11/PJ/2025, as amended by PER-12/PJ/2026. Articles 6 and 7, the BP21 and BP26 slips, given to the recipient each time.
- UU No. 13 Tahun 2003 on Manpower, Article 156(4), as amended by UU No. 6 Tahun 2023: compensation of rights.
Severance pay tax in Indonesia (pajak pesangon, the tax on severance pay) is a final income tax on severance paid in one go, withheld by the employer or other body that pays it. This page sets it out whether you are paying it or receiving it.
Severance paid in one go is taxed under PPh 21 (Pajak Penghasilan Pasal 21, the income tax on pay for work) at its own rate bands. They run from 0% on the first IDR 50 million to 25% on anything above IDR 500 million. The tax is final: it settles the employee’s income tax on that payment (PP 68/2009, a Peraturan Pemerintah or government regulation, Articles 2(1) and 4).
How much severance is owed is a separate question, covered in our guide to severance pay and termination.
Written on 19 October 2026
This page states the tax rules in force on 19 October 2026. A new manpower law has been passed by parliament, according to press reports, and may change what severance is owed; our guide to employment law in Indonesia says where it stands. We will revise this page if the law or the tax rules on it change.
What counts as severance for tax
For tax, “severance” (uang pesangon) is wider than the severance scale alone. It is anything an employer pays, however it is named, because service ends or employment is terminated, and it includes (PP 68/2009, Article 1 point 4):
- severance pay (uang pesangon) itself;
- long-service pay (uang penghargaan masa kerja);
- compensation of rights (uang penggantian hak).
Three other lump sums have bands of their own: a pension lump sum, old-age allowance (THT, Tunjangan Hari Tua) and old-age savings (JHT, Jaminan Hari Tua) paid out in one go (Articles 2(1) and 5). The rules apply to employees who are resident in Indonesia for tax (Article 1 point 3).
Severance pay tax rates in Indonesia
These are the PPh 21 pesangon rates. Each band taxes only the slice of the gross amount that falls inside it, so a larger payment never pushes the earlier slices into a higher rate.
| Severance | Pension, THT, JHT | |
|---|---|---|
| 0–50m | 0% | 0% |
| 50m–100m | 5% | 5% |
| 100m–500m | 15% | 5% |
| Over 500m | 25% | 5% |
A worked example
The regulation works its own example: IDR 175 million of severance paid in one go (PP 68/2009, Elucidation to Article 4).
| Description | IDR |
|---|---|
| First IDR 50 million 0% × 50,000,000 | 0 |
| Next IDR 50 million 5% × 50,000,000 | 2,500,000 |
| Next IDR 75 million 15% × 75,000,000 | 11,250,000 |
| Final PPh 21 | 13,750,000 |
For old-age savings the same regulation gives a JHT payout of IDR 150 million, which bears IDR 5,000,000: 5% of the IDR 100 million above the first IDR 50 million (PP 68/2009, Elucidation).
Paid in instalments
Severance paid in parts within two calendar years still counts as paid in one go, and the bands apply to the running total (PP 68/2009, Article 2(2); PMK 16/PMK.03/2010, a Peraturan Menteri Keuangan or Minister of Finance regulation, Article 3(2)).
In the regulation’s example, IDR 50 million paid in December falls in the nil band. IDR 125 million paid the following April is taxed at the bands that remain. The tax comes to IDR 13.75 million in all, as if the whole amount had been paid at once.
Anything paid after the two-calendar-year window is taxed differently. It is taxed at the ordinary personal income tax rates of Article 17(1)(a) of the Income Tax Law, on that year’s payments, and the tax is not final. The employee can credit it in the annual return (PP 68/2009, Article 6(1) and (2)).
How this differs from monthly PPh 21
| Rate | Final | |
|---|---|---|
| Salary | TER monthly rate | No |
| Severance | PP 68 bands | Yes |
| Later years | Article 17 rates | No |
| Pay, non-resident | 20% or treaty rate | Yes at 20% |
Severance has its own final rates under PP 68/2009, so it is taxed apart from the employee’s other pay. Salary paid to permanent employees goes through the monthly effective rate (TER) and a year-end calculation (PMK 168/2023, Article 5(3)), set out in our guide to PPh 21 effective rates.
Foreign employees
A foreign employee who is resident in Indonesia for tax is taxed under PP 68/2009 like any other employee. Pay for work to someone who is not resident falls under PPh 26 (Pasal 26, the income tax on payments to non-residents): 20% of the gross amount, final, or the rate in a tax treaty (PMK 168/2023, Article 14(1)). The payer gives a BP26 slip (bukti pemotongan, the proof of tax withheld) under Article 7 of PER-11/PJ/2025, a Director General of Taxes regulation.
Whether a treaty changes the position depends on the treaty and on the employee’s circumstances. Our guides to PPh 26 and to the Indonesia–Singapore tax treaty cover treaty rates.
Who withholds the tax
PP 68/2009 places the withholding on the employer or other body that makes the payment (Article 1 point 9).
You, the employer
The employer withholds on severance it pays, including each instalment.
The pension fund
An employer pension fund or a financial-institution pension fund withholds on a pension lump sum it pays.
The social security body
The workers’ social security body (badan penyelenggara jaminan sosial tenaga kerja) withholds on the JHT old-age savings it pays out (PP 68/2009, Article 1 points 7 and 9).
Paying, filing and the slip
The tax is due when the severance is paid (PMK 16/PMK.03/2010, Article 2(4)). The employer pays it by the 15th of the following month. It reports it in the monthly PPh 21/26 return within 20 days after the month ends. Either date moves to the next working day if it falls on a holiday (PMK 81/2024, Articles 94(2)(c), 100, 171(1)(c) and 173).
A slip is due even when the tax is nil
The payer makes a BP21 slip (the same proof of withholding, for PPh 21) and gives it to the employee, including for a payment that falls entirely in the 0% band (PP 68/2009, Article 7(3); PER-11/PJ/2025, Articles 6(1)(c) and 7(3), as amended by PER-12/PJ/2026).
If you are the employee
You receive the severance less the final PPh 21 withheld, with a BP21 slip showing the tax. In your annual personal tax return it goes in as income already taxed at a final rate. The tax on it is not credited against the year’s tax (PMK 168/2023, Article 22(3) and (4)). Our personal tax service prepares and files that return.
Questions
Is pay for unused leave taxed as severance?
Who withholds when severance was put into a severance fund?
What if the severance is paid in a foreign currency?
How MAM helps
Our payroll service handles severance like any other payment. Calculating what is owed, and preparing the mutual agreement, is part of our HR consulting.