Many foreigners in Bali hear terms like PPh 21 and PPh 23 and assume they are just different labels for the same tax. In reality, they sit in different parts of Indonesia’s income tax framework and are treated differently by the authorities and payroll systems. If your salary, consulting fee, or dividend is reported under the wrong scheme, it can create mismatches in your personal income tax position with the official Directorate General of Taxes income tax guidance.
The first confusion usually appears when people receive payslips marked “PPh 21” while also being paid separate professional or service fees subjected to “PPh 23.” Both are covered by Indonesia’s income tax rules, but they differ in who withholds, how rates are calculated, and how they affect your annual return. To understand those differences clearly, it helps to compare them directly with the definitions and examples used in official PPh 21 regulations for employees.
At the same time, Bali-based remote workers, consultants, and business owners often mix personal and business income in a way that makes the boundary between PPh 21 and PPh 23 even less obvious. Some payments are meant to be final withholding, while others are only credits against your annual tax. Cross-checking your own situation against official Indonesian tax payer service information helps you see which income falls into each category and where adjustments might be needed 😊.
This guide walks through the structure of tax in Bali, Indonesia in simple language, then breaks down exactly how PPh 21 and PPh 23 work, who they apply to, and how they feed into your personal income tax rate. You will see practical examples of common expat and local scenarios, typical mistakes made by employers and freelancers, and concrete steps you can take to keep your position clean, compliant, and optimised for the long term 💼.
Table of Contents
- How tax in Bali treats PPh 21 and PPh 23 for individuals 🧾
- Core rules of tax in Bali on PPh 21 employment income 💼
- When PPh 23 applies instead of PPh 21 in Bali tax rules 📄
- Comparing tax in Bali on salaries, services, and invoices ⚖️
- Practical calculation examples of tax in Bali for real cases 🧮
- Real Story — tax in Bali PPh 21 and 23 for a Bali consultant 📖
- Common tax in Bali mistakes with PPh 21 and PPh 23 to avoid ⚠️
- Planning ahead for tax in Bali and annual income reporting 🔍
- FAQ’s About tax in Bali, PPh 21 rules, and PPh 23 withholding ❓
How tax in Bali treats PPh 21 and PPh 23 for individuals 🧾
For individuals, tax in Bali is not a separate regional system; it is the national Indonesian tax framework applied to income you earn while living or working on the island. Most personal tax is collected through withholding tax Indonesia, where the payer deducts tax before paying you and then reports it to the Directorate General of Taxes.
Broadly, PPh 21 governs employee income tax on salaries, wages, overtime, bonuses, and similar employment-related payments received by individuals. The employer calculates monthly withholding using the progressive personal income tax rate Indonesia, considering allowances, social security contributions, and your reported family status.
PPh 23, on the other hand, is a withholding tax Indonesia applied to certain types of domestic income such as service fees, royalties, and some rentals when paid to resident taxpayers, whether they are companies or individuals. Instead of using full progressive bands, PPh 23 uses fixed percentages on the gross amount (for example, 2% on many service fees) and is usually creditable against your annual tax due.
For someone living in Bali, this means your payslip, your freelance invoices, and even some investment income may each have different withholding codes. Understanding the difference between PPh 21 and PPh 23 helps you avoid double taxation, align your cash flow with your actual tax burden, and ensure that the right credits show up in your annual return 🙂.
Core rules of tax in Bali on PPh 21 employment income 💼
When we talk about employee tax in Bali, PPh 21 sits at the heart of the system. It applies to income from employment, including regular salaries, fixed allowances, holiday bonuses (THR), and many benefits in cash or in kind that you receive as an employee. Employers must act as withholding agents and calculate PPh 21 every pay period, then remit the tax and report it in monthly returns.
The calculation relies on the progressive personal income tax rate Indonesia, where higher annual income bands are taxed at higher percentages. In broad terms, the system starts with a lower rate for income within the basic band and climbs through several higher brackets for those whose taxable income exceeds specific thresholds. Tools and official calculators simplify the monthly breakdown by translating annual brackets into practical payroll withholding amounts.
In practice, your employer in Bali starts from your gross salary, subtracts mandatory social security contributions such as BPJS, applies allowable non-taxable income (PTKP) for you and your dependents, then applies progressive rates to the remaining taxable income. The result is your monthly PPh 21; this shows on your payslip and acts as a prepayment of your final employee income tax. If your employer makes mistakes—wrong PTKP, missing BPJS, or misapplied bonuses—your effective tax in Bali may be too high or too low 😅.
For foreigners in Bali, classification as a resident taxpayer vs non-resident is also crucial. Residents are generally subject to PPh 21 based on worldwide income, while non-residents typically fall under PPh 26 final withholding at a flat percentage on Indonesian-sourced employment income. Knowing which category you fall into ensures that your tax in Bali and your global tax plans align correctly.
When PPh 23 applies instead of PPh 21 in Bali tax rules 📄
When talking about tax in Bali, you will often see PPh 23 appear on invoices and payment vouchers instead of PPh 21. PPh 23 applies when certain types of domestic income—such as service fees, technical services, management fees, royalties, and specific rentals—are paid to resident taxpayers, including individuals who operate as independent consultants or small business owners.
A classic example involves a Bali villa hiring a freelance photographer. If the photographer is not an employee but invoices as a service provider, the villa company may withhold PPh 23 (for instance, 2% of the gross fee) rather than treating the payment as payroll under PPh 21. The tax withheld becomes a credit against the photographer’s final personal income tax rate Indonesia, reported in their annual return. This is why many Bali-based freelancers see PPh 23 lines on payment receipts instead of PPh 21 🙂.
The difference between PPh 21 and PPh 23 is therefore not just about percentages but about the legal nature of the relationship. If there is an employment relationship—clear hierarchy, fixed working hours, and regular salary—PPh 21 should normally apply. If the relationship is more independent, with project-based work and invoices, PPh 23 becomes more likely. Misclassifying someone as a “freelancer” to avoid obligations like BPJS or labour law can create serious compliance risks.
From the payer’s perspective, correctly applying PPh 23 under tax in Bali rules also affects deductibility and documentation. You must issue proper withholding slips, include them in monthly returns, and ensure that the recipient can later use them as credit toward their final employee income tax or business income tax, depending on their status. Poor documentation may cause the tax authority to deny credits or expenses during an audit.
Comparing tax in Bali on salaries, services, and invoices ⚖️
A useful way to internalise tax in Bali is to compare three common income streams: salaries, domestic service invoices, and overseas income. Salaries paid by a Bali company to an employee are normally subject to PPh 21. Domestic service invoices issued by a resident consultant to a Bali company often trigger PPh 23. Overseas income (for example, payments from foreign clients) may fall under general personal income tax rate Indonesia rules without local withholding, but still must be reported in the annual return if you are resident.
Under PPh 21, the focus is the employee income tax calculation each month: progressive rates, PTKP, BPJS, and the annual reconciliation. The employer bears most of the administrative burden and is exposed to penalties if withholding is incorrect. For the employee, the primary task is checking payslips, keeping Form 1721-A1 or its equivalent, and including all employment income when filing an annual return.
Under PPh 23, the emphasis shifts to withholding tax Indonesia on gross service fees. The payer withholds a fixed percentage and reports it; the recipient uses the withholding slip to claim the amount as a credit against their final tax. If your business in Bali has multiple PPh 23 income streams, the credits can significantly reduce your final liability—but only if records are complete and all slips are collected and reported correctly 😊.
From a planning viewpoint, understanding the difference between PPh 21 and PPh 23 lets you design more efficient pay structures. You can decide when a genuine employment contract is appropriate and when project-based, invoice-based collaboration makes sense, without crossing legal lines. That is essential if you are running a small company, villa, or agency in Bali and want your tax in Bali to remain predictable and defensible.
Practical calculation examples of tax in Bali for real cases 🧮
Consider a Bali-based marketing manager earning a fixed salary from a PT company. Each month, her tax in Bali under PPh 21 is calculated using the progressive brackets after deducting BPJS and PTKP. If she receives a performance bonus, that amount is added to taxable income for the year and increases her personal income tax rate Indonesia on the higher portion of income, which may push part of her earnings into a higher bracket.
Now picture a freelance web designer living in Bali who invoices domestic companies for website projects. When a Bali company pays his invoice, it may withhold 2% PPh 23 on the gross fee and pay him the net amount. Throughout the year, his tax in Bali position depends on total gross revenue minus allowable expenses, while the PPh 23 withheld by clients becomes a tax credit. If his actual liability is lower than total withholding, he may be entitled to a refund; if higher, he must pay the difference when filing his annual return.
A third case involves a yoga instructor in Bali who receives both salary and freelance payments. Her studio employs her part-time with PPh 21 on monthly payroll, while resorts and retreats hire her for special events using invoices subject to PPh 23. In this mixed scenario, her final tax in Bali outcome depends on aggregating all income—salaries, service fees, and possibly overseas earnings—then offsetting all PPh 21 and PPh 23 already withheld against the total annual liability.
These examples show why you cannot look at a single slip or invoice in isolation. You need to see how every PPh 21 and PPh 23 deduction connects to the broader difference between PPh 21 and PPh 23 and how both feed into your final personal income tax rate Indonesia at year-end. With good bookkeeping and consistent coding, you reduce the risk of surprises, penalties, or missed refunds 🙂.
Real Story — tax in Bali PPh 21 and 23 for a Bali consultant 📖
Maya, an Indonesian marketing consultant living in Canggu, illustrates how tax in Bali really works in practice. She works three days a week as an in-house strategist for a Bali-based PT, which pays her a regular salary under PPh 21. On the side, she consults for several villas and cafés, invoicing them directly for branding projects and social media campaigns. Those clients withhold PPh 23 on her invoices and send her proof of withholding each month.
During the year, Maya focuses on her work and lifestyle rather than on the technical difference between PPh 21 and PPh 23. She sees tax codes on payslips and invoices but assumes everything is being handled correctly. It is only when a friend mentions annual filing that she realises she must aggregate all her income and credits. She gathers her salary slips, PPh 23 withholding documents, and records of small expenses such as coworking memberships and software subscriptions.
With help from a tax consultant, Maya calculates her total taxable income according to the personal income tax rate Indonesia, subtracting allowable expenses from her freelance income and including her PPh 21 salary in full. The consultant then subtracts all PPh 21 and PPh 23 withheld throughout the year as credits. Because she had decent PPh 23 withholding and legitimate deductible expenses, her final additional payment is much smaller than she feared 😊.
The experience changes how she manages tax in Bali going forward. She insists on proper PPh 23 slips from clients, checks that her employer’s PPh 21 calculations match official brackets, and keeps simple but complete records of her business expenses. More importantly, she understands that PPh 21 and PPh 23 are not competing taxes but complementary mechanisms that feed into one annual picture of her income and obligations. That awareness gives her more control over cash flow, compliance, and long-term planning as her consulting business grows.
Common tax in Bali mistakes with PPh 21 and PPh 23 to avoid ⚠️
One of the most common errors around tax in Bali is misclassification of working relationships. Employers sometimes label people as “freelancers” to avoid labour and social security obligations, while still treating them like full-time staff. If the tax authority later decides the relationship is truly employment, PPh 21, not PPh 23, should have applied, and the company can face back taxes and penalties.
Another mistake is ignoring documentation. Employees misplace PPh 21 forms, and freelancers lose PPh 23 slips. Without these, it is harder to prove what withholding tax Indonesia has already been paid, which can lead to higher net liability or delays in refunds. In Bali, where many people move between villas, cafés, and coworking spaces, organising cloud backups for all tax documents is a simple but powerful habit.
A third pitfall is assuming that PPh 21 or PPh 23 are “final” in all cases. For resident taxpayers, most PPh 21 and PPh 23 are prepayments, not the final word on your personal income tax rate Indonesia. If your true annual liability is higher than total withholding, you must pay the difference; if lower, you may be due a refund. Treating every deduction as final can make you either complacent or unnecessarily anxious about your true tax in Bali position 😅.
Finally, many taxpayers forget that overseas income may still be taxable in Indonesia if they qualify as resident taxpayers. While PPh 21 and PPh 23 mostly focus on domestic payments, your annual return may need to include foreign income and claim foreign tax credits where applicable. Ignoring this can create risk in the event of data sharing between tax authorities or lifestyle audits that focus on Bali-based residents with significant overseas activity.
Planning ahead for tax in Bali and annual income reporting 🔍
Good planning transforms tax in Bali from a year-end scramble into a manageable routine. The first pillar is classification: clearly separate employment roles (PPh 21) from independent service contracts (PPh 23) with proper written agreements, job descriptions, and payment terms. This protects both sides in the relationship and reduces the chance of disputes with the Directorate General of Taxes.
The second pillar is documentation. Employees should preserve payslips, annual PPh 21 summaries, and any proofs of other tax withheld. Freelancers and consultants should collect PPh 23 slips from all Bali-based clients and keep invoicing and expense records well organised. Taken together, these documents create the backbone for calculating your final personal income tax rate Indonesia and proving that PPh 21 and PPh 23 credits have been correctly applied.
The third pillar involves using technology wisely. Official calculators, e-filing systems, and withholding tools make it easier to keep numbers consistent with current brackets and rules. Combining these with professional advice—when needed—helps ensure that both employers and individuals in Bali are applying the difference between PPh 21 and PPh 23 correctly and benefitting fully from available credits 😊.
Ultimately, treating tax in Bali as an ongoing process instead of a once-a-year headache will improve cash flow visibility, reduce audit risk, and support better personal and business decisions. Whether you are an employee, a freelancer, or a company director, a clear understanding of how PPh 21 and PPh 23 interact is one of the strongest tools you can have for long-term financial stability on the island.
FAQ’s About tax in Bali, PPh 21 rules, and PPh 23 withholding ❓
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Is tax in Bali different from the rest of Indonesia?
No. Tax in Bali follows the same national laws and regulations as the rest of Indonesia. The difference is mainly in the types of work common in Bali, such as hospitality and remote work, which often combine PPh 21 and PPh 23 income.
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What is the main difference between PPh 21 and PPh 23?
PPh 21 generally applies to employee income tax on salaries and similar payments, while PPh 23 is a withholding tax Indonesia on certain domestic service fees, royalties, and other specific income types. For residents, both usually act as prepayments of final income tax.
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How does the personal income tax rate Indonesia connect to PPh 21?
PPh 21 uses the progressive personal income tax rate Indonesia to calculate withholding on your taxable employment income. The tax deducted from your Bali salary each month is based on your estimated annual income, adjusted for PTKP and eligible deductions.
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Can PPh 23 withheld on my invoices reduce my final tax bill?
Yes. PPh 23 is typically creditable against your final annual liability. When you file your return, you total your income, apply the progressive rates, and then subtract all PPh 21 and PPh 23 already withheld. If withholding exceeds your true liability, you may be eligible for a refund.
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Do foreigners in Bali always pay PPh 21?
Not always. Foreigners who qualify as non-residents usually fall under PPh 26 for Indonesian-sourced employment income. Those who are resident taxpayers may be treated similarly to locals, with PPh 21 on salaries and PPh 23 on certain services, depending on their specific work arrangements.
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What should I check on my payslip or invoice related to tax in Bali?
Ensure that the correct tax article (PPh 21, PPh 23, or PPh 26) is shown, that the withholding amount makes sense for your income, and that you receive proper withholding evidence. These details are crucial later when you file your annual return and calculate your tax in Bali position.
