EVALUATION OF THE NET AND GROSS ACCOUNTING METHOD …

i

EVALUATION OF THE NET AND GROSS ACCOUNTING

METHOD TO CALCULATE THE INCOME TAX PPH 21

IN PT. LEMATANG COAL LESTARI

(Case study)

THESIS

By

Tian Hongliang (Eirysaint)

008200800053

Presented to

The Faculty of Economic President University

In partial fulfillment of requirements

for

Bachelor Degree in Economics, Major in Accounting

President University

Cikarang Baru – Bekasi

Indonesia

Feb 2012

ii

PANEL OF EXAMINERS

APPROVAL SHEET

Herewith, the Panel of Examiners declare that the Thesis entitled “EVALUATION

OF THE NET AND GROSS ACCOUNTING METHOD TO CALCULATE

THE INCOME TAX PPH 21 IN PT. LEMATANG COAL LESTARI” submitted

by Tian Hongliang majoring in Auditing, Faculty of Economics was assessed and

proved to have passed the Oral Examination on (day and date of defense).

Chair, Panel of Examiner,

…………………………………..

Dr. Sumarno, SE, MBA, AK

Examiner 1

…………………………………...

Misbahul Munir, AK, MBA

Examiner 2

……………………………………

Nil Sonata, MH

iii

THESIS ADVISER

RECOMMENDATION LETTER

This Thesis entitled “EVALUATION OF THE NET AND GROSS

ACCOUNTING METHOD TO CALCULATE THE INCOME TAX PPH 21 IN

PT. LEMATANG COAL LESTARI” prepared and submitted by Tian Hongliang in

partial fulfillment of the requirements for Bachelor Degree in Economics - Major in

Management, has been reviewed and found to have satisfied the requirements for a

thesis fit to be examined. We therefore recommend this thesis for Oral Defense.

Cikarang, Indonesia, 18 January 2012

Acknowledge

Dr. Sumarno, SE, MBA, AK

Thesis Advisor,

Drs. Matias Zakaria, M. Si.,AK

iv

DECLARATION OF ORIGINALITY

This thesis entitled “EVALUATION OF THE NET AND GROSS

ACCOUNTING METHOD TO CALCULATE THE INCOME TAX PPH 21 IN

PT. LEMATANG COAL LESTARI” prepared and submitted by Tian Hongliang in

partial fulfillment of the requirements for Bachelor Degree in Economics Major in

Management has been reviewed and found to have satisfied the requirements for a

thesis fit to be examined. I therefore recommend this thesis for Oral Defense.

Cikarang, Indonesia, 13 January 2012

Researcher,

Tian Hongliang

008200800053

v

EVALUATION OF THE NET AND GROSS ACCOUNTING METHOD TO

CALCULATE THE INCOME TAX PPH 21 IN PT. LEMATANG COAL

LESTARI

Abstract

Tax is related to every business, every company need to concern about the

income tax whether it get profit or not. As long as the company paid to the employee,

the individual income tax must be concerned. In one company, usually there are two

kinds of income tax – employee income tax and company income tax. Regard to

individual income tax, there are two methods to calculate – gross method and net

method. The aid of this research is to find which method is more favorable for the

company to minimize the company's total individual income tax payment but still

according to the relevant Indonesia tax laws and Indonesia tax regulations.

The data related to the company’s income tax was collected by the researcher

directly from the accounting and finance department of the company with the

permission of the CFO, since the researcher is the one who deal with the tax affairs.

Then, the analysis of data gathered was conducted by the means of calculation,

assisted by the functions in Microsoft excel.

After the analysis of the data, the researcher find the mystery behind the gross

and net method. The finding was about in which cases the company should practice

the gross method, meanwhile, in which cases the company should practice the net

method. From the finds, the researcher has developed a new accounting system to

report the income tax which can save a lot of tax expenses every year for the company

with reasons other than tax fraud.

For the company, I suggest every employee should have the NPWP card. The

company uses gross method to calculate the employee income tax; means withholds

the employee income tax every month and report to tax office on time. Make the

journey entry properly and adjust the tax expense carefully in the end of the year.

Every carefully to deal with the tax, do not do anything related to tax fraud.

Key words: tax, income tax, net method, gross method, tax expense

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ACKNOWLEDGEMENT

Dear God, thank you for let me finish this thesis. May all things happen through

your kindness in every step I do and every word I use.

Now I have finished this thesis as one of the requirements to obtain a bachelor

degree in President University. All sweet and bad memories have glanced through my

mind in a second. I would like to express my gratitude to every people who have

supported me from the beginning to the end.

My special regards and thanks to Mr.Gunadi Gunawan (Gorge Lee), the

President of Panin Group, for his generous sponsor. He gives me the opportunity to

study in President University. I would like to send my countless thanks to my parents

for their love and encourage to me every time when I get disappointed.

My thanks to my friend Huang Junsong, with his help, we create the PPh21

calculate software.

My regards to all involved parties in President University:

- Mr. Misbahul Munir, as Activing Dean Faculty of Economics, who gave me a lot

of helps and encouraged me during my study.

- Mr. Sumarno Zain, as the Head of Accounting Study Program, who gave a lot of

helps and encouraged me during my study.

- Ms. Tuti, as the Secretary Staff of the Accounting Study Program, who helps me

with the information.

- Mr. Nil Sonata, my thesis advisor who gave me lots of insight and suggestions in

completing this thesis.

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- Mr.Faisal Abdullah, my first accounting lecture in President University, who led

me to enjoy the challenging and interesting Accounting.

- Ms. Mila Reyes、Mr. Ahalik、Mr. Choirul Awar and Mr.Umar Subandijo, my

accounting lectures at President University.

- All other lectures who have given me knowledge during my study at President

University.

My regards to all involved parties in PT. Lematang Coal Lestari that allowed

and supported me in doing the research and giving much suggestion during the

process.

- Mr. Jeffery, as the General Manager, who provided me the internship

opportunity.

- Mr. Gary, as the Accounting Manager, who gave me so many advices and

encouraged me during the internship.

- All the workmates in LCL who gave me support and help.

Thanks to all!

Cikarang, January 2012

Tian Hongliang

viii

TABLE OF CONTENTS

Outside title

Inside title……………………………………………………………… i

Panel of Examiners Approval Sheet…………………………………. ii

Thesis Adviser Recommendation Letter……………………………. iii

Declaration of Originality……………………………………………. iv

Abstract………………………………………………………………... v

Acknowledgement…………………………………………………….. vi

Table of Contents……………………………………………………… viii

List of Tables…………………………………………………………... ix

List of Figures………………………………………………………… xi

Chapter I: Introduction………………………………………………… 1

Chapter II: Literature Review………………………………………….. 7

Chapter III: Data Processing Method and Company’s Condition…………. 18

Chapter IV: Analysis and Evaluation……………………………………… 26

Chapter V: Conclusion and Recommendation……………………………… 52

References…………………………………………………………………… 54

Company’s Confirmation Letter …………………………..………………….. 56

Curriculum Vitae ……………………………………………………………. 57

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List of Tables

Table 1.1 Journal Entries to record the payment of salary and PPh21 by using net

method…………………………………………………………………….2

Table 1.2 The net calculation of PPh21 for the Indonesia general manager (TK)…. 3

Table 4.1 The sample payroll data……………………………………………...… 26


method…………………………………………………………………... 27

Table 4.3 The net calculation of PPh21 for the Indonesia general manager (TK)….. 28

Table 4.4 Normal Tax Rate applicable to Individual Taxpayers…………………… 29

Table 4.5 Non-taxable incomes for Individual Taxpayers…………………………. 30

Table 4.6 The Gross method calculation of PPh 21 for the General Manager (TK).. 30

Table 4.7 Journal Entries to record the payment of salary and PPh21 by using gross

method…………………………………………………………………… 31

Table 4.8 The summary of PPh 21 calculation for the General Manager………… 31

Table 4.9 The Gross calculation of PPh21 for the accounting manager (K/1)……. 32

Table 4.10 The Net calculation of PPh21 for the accounting manager (K/1)…….. 33

Table 4.11 The summary of PPh21 calculation for Accounting Manager…………. 33

Table 4.12 The Gross calculation of PPh21 for the department manager (K/2)……. 34

Table 4.13 The Net calculation of PPh21 for the department manager (K/2)…….. 35

Table 4.14 The summary of PPh21 calculation for Department Manager……….. 35

Table 4.15 The Gross calculation of PPh21 for the Employee D (TK)………….. 36

x

Table 4.16 The Net calculation of PPh21 for the Employee D (TK)…………….. 37

Table 4.17 The summary of PPh21 calculation for Employee D……………....... 37

Table 4.18 The Gross calculation of PPh21 for the Employee E (K/1)…………. 38

Table 4.19 The Net calculation of PPh21 for the Employee E (K/1)……………. 39

Table 4.20 The summary of PPh21 calculation for Employee E………………… 39

Table 4.21 The Gross calculation of PPh21 for Employee F(K/0)………………… 40

Table 4.22 The Net calculation of PPh21 for the Employee F (K/0)……………… 41

Table 4.23 The summary of PPh21 calculation for Employee F…………………. 41

Table 4.24 The Gross calculation of PPh21 for the accountant (TK)……………. 42

Table 4.25 The Net calculation of PPh21 for the accountant (TK)……………….. 43

Table 4.26 The summary of PPh21 calculation for Accountant………………….. 43

Table 4.27 The Gross calculation of PPh21 for the Driver H (K/2)………………. 44

Table 4.28 The Net calculation of PPh21 for the Driver H (K/2)………………….. 45

Table 4.29 The summary of PPh21 calculation for Driver H……………………… 45

Table 4.30 The Gross calculation of PPh21 for the Driver I (K/3)……………….. 46

Table 4.31 The Net calculation of PPh21 for the Driver I (K/3)………………….. 47

Table 4.32 The summary of PPh21 calculation for the Driver H………………… 47

Table 4.33 The Gross calculation of PPh21 for the Security man (K/1)………… 48

Tab le 4.34 The Net calculation of PPh21 for the Security man (K/1)…………… 49

Table 4.35 The summary of PPh21 calculation for Security man…………………. 49

Table 4.36 The comparison of gross and net method in the current situation……… 51

xi

List of Figures

Figure 3-1The company organization structure……………………………………. 25

Figure 4-1The comparison of Gross and Net calculation of PPh21……………….. 50

1

CHAPTER I

INTRODUCTION

I.1. Background of the Study

Business is always related to tax; no matter what type the business is and no matter

whether the business is big or small. When the researcher has the internship in PT.

LEMATANG COAL LESTARI, the main job is to help the finance manager to deal

with the tax.

Since the company is a newly founded company in Indonesia, there is still no

production activity. As far as the company‘s operation, there are only three kinds of

taxes. Firstly, the rental tax which is defined in Pajak Penghasilan pasal 4 ayat (2) in

Indonesia Tax Law. Secondly, company income tax which is known as Pajak

Penghasilan pasal 25 in Indonesia. Last, the employee income tax which is known as

Pajak Penghasilan pasal 21 in Indonesia.

However, the rent tax is just calculated from the value of the transaction which is

the rent expense, it has nothing difficult. For the company income tax, there is no

production activity, there is no tax. Consequently, the company monthly income tax is

always zero until the researcher finished the internship. This is why the study is only

concern about the individual income tax payment in the company.

This study seeks to evaluate the gross method and net method to calculate the

income tax PPH21 in LCL. To find out which one is more favorable for the company.

2

I.2. Problem Identification and Statement

Now the company is using the net method to calculate employee income tax. For

example, the Indonesia general manager‘s monthly salary is Rp13,000,000; and no

marry, no dependant. In the end of the month, the general manager will take home

salary Rp 13,000,000. Usually in company, salary was payable on date 25 in each

month. Then, the salary will be paid in the end of each month. The employee income

tax was usually deposited to the bank which was appointed by the tax office and

reported to the tax office before date 10 in the following month.

Here is the journal under net method:


method

Date Accounts Debit Credit

25 Feb, 2011 Salary Expense 13,000,000

Employee income tax expense 1,447,000

Salary Payable 13,000,000

Tax Payable-PPh21 1,447,000

To record the salary and tax

28 Feb, 2011 Salary Payable 13,000,000

Cash-Rp 13,000,000

To pay the salary

10 Mar, 2011 Tax Payable-PPh21 1,447,000

Cash-Rp 1,447,000

To deposit the income tax to the bank

Here is the form to calculate the employee income tax under net method:

3

Table 1.2 The net calculation of PPh21 for the Indonesia general manager (TK)

Item Month

annualize

Salary 13,000,000 12 156,000,000

Gross-up salary 14,742,000 12 176,904,000

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 500,000 12 6,000,000

Jamsostek 295,000 12 3,540,000

pension 200,000 12 2,400,000

PKP 12,427,000 12 149,124,000

PPh21 1,447,000 12 17,364,000

Take home salary 13,000,000 12 156,000,000

There are two methods – gross and net to calculate the individual income tax

under the current Indonesia Income Tax Law. The different method will lead to

different amount of individual income tax payment for the company. The problem is

which method is more favorable for the company?

4

Statement of the Problem

The objective of this study is to find the way to minimize the employee individual

income tax payment of PT. Lematang Coal Lestari. However, the way still under the

current Indonesia Income Tax Law and the relevant regulation. So the problems will be:

Consider about the gross and net method to calculate the employee individual

income tax PPh 21, which method is the favorable method for the company in

current situation?

In order to solve these problems, the researcher must get enough payroll data

from the company and then do the comprehensive calculation and comparison to get the

conclusion. The payroll data should be different from the top management to the normal

staff whoever is subject to employee income tax.

I.3. Scope and Limitation of the Study

The scope of this study is limited only to the company‘s employee income tax in

Indonesia. It is bounded to be provided that the company is Indonesia taxpayer, and all

the employees are Indonesia taxpayers also without any income from offshore. It is only

the research on Indonesia income tax, not involved in the international taxation, so my

research is not applicable in other country‘s taxation, such as the shareholder in China.

In conducting this study, there are some limitations found. The study can not be

done in broader, due to the limitation of access to all employees‘ income data, from

both Indonesia source and offshore income, are not permitted to use due to the

confidentiality.

5

I.4. Research Objectives

Research objectives are as following:

1. to analyze which accounting practice, the gross method or the net method which one

is more favorable for the company in current situation, and

2. to minimize the company‘s employee individual income tax payment legally.

I.5. Research Benefits

The benefits of the study are stated as follow:

1. To PT. Lematang Coal Lestari

With the research, the accounting & finance department of LCL can find a best

way for both the company and its employees to calculate, withhold, deposit and report

the individual income tax.

2. To President University Students

This research can be served as an additional guidance or reference in completing

similar research. And also, it gives additional insights about real case study that had

been done by the undergraduate.

3. To other organizations

For most of the companies, industries, schools, hospitals, and other organization

in Indonesia whichever has employment, they can get beneficial thinking from my

research.

I.6. Research Method

The research method in this thesis is also important to achieve the goals of this

research. In the research, the writer uses qualitative research approach with management

6

consultant engagement. The research emphasizes on one comparing the gross and net

method in calculating employee income tax by choosing a small size of samples. The

writer believed that the results of the analysis will be effective and beneficial for the

company.

In this study, the researcher tried to evaluate the accounting practice for employee

individual income tax in the company. The process of evaluation is central to qualitative

research because the writer choose the small size of employee payroll sample to

calculate the amount of individual income tax under gross and net method. Then the

researcher makes form to compare the results to see which method is more favorable for

the company perspective.

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CHAPTER II

LITERATURE REVIEW

Realizing that monetary and economic crisis emerged in Indonesia from the middle

of 1997 were caused by huge number of foreign loan, the Indonesia government has

attempted to increase the revenue from tax sector. The increase is directed to achieve a

tax ratio, which regionally can be fairly accepted. Therefore, start from year 2000 till

now, the government and House of Representative (DPR) have amended several tax

laws. The amendments consist of Law on General Provisions and Tax Procedures,

Income Tax, Value Added Tax on Goods and Services and Sales Tax on Luxury Goods,

Acquisition Duty of Right on Land and Building, and Tax collection with Course

Warrants. Year 2008, the government and DPR had agreed to enact the new law on Tax

Court. These will be the primary literature that I used to provide the theoretical

grounding to the research.

II. 1 Book Keeping and Record

2.1.1 Legal Basis

1. Law No. 6 of 1983 re General Provisions and Tax procedures as Amended by the

Law No. 28 of 2007.

2. The Degree of Minister of Finance No. 533/KMK.04/2000, of 22 December 2000, re

Maintaining bookkeeping in a Currency other than Rupiah and Filing Annual tax

return.

3. The Degree of Minister of Finance No. 543/KMK.04/2000, of 22 December 2000, re

8

Using Foreign language in Bookkeeping and Recording.

4. The Degree of Director General of Taxes No.KEP-520/PJ/2000, of 4 December 2000,

re the Form and Procedures of Recording for Individual Taxpayer.

2.1.2 The Meaning of Bookkeeping

1. Bookkeeping is a process of orderly recording,

2. To collect financial data and information including assets, liabilities, equity, income

and expenses, and acquisition cost and sales price of goods or service.

3. Concluded with a financial statement in the form of a balance sheet and income

statement at the end of each Taxable Year.

(http://www.villagevolunteers.org/wp-content/uploads/2011/06/Basic-Bookkeeping.

pdf)

2.1.3 Basic Provisions on Bookkeeping

1. An individual Taxpayer who is engaged in business activities or independent personal

services and a corporate Taxpayer in Indonesia is obliged to keep book and records.

2. A Taxpayer exempted from the obligation on keep book on record but obliged to

keep record is an individual who is engaged in business activities or independent

personal services and who-according the provisions of the tax laws—is permitted to

calculate his net income by using the calculation norm and an individual Taxpayer who

is not engaged in business or independent personal services.

3. The bookkeeping or recording shall be conducted in Indonesia by using Latin

character, Arabic numeral, and Rupiah currency, and shall be written in Indonesia

9

language or in a foreign language approved by the Minister of Finance.

4. The bookkeeping shall be maintained consistently in either accrual or cash basis.

5. The bookkeeping shall at least consist of records of assets, liabilities, equity, income

and expenses, as well as sales and purchases, so that the amounts of tax payable can be

calculated.

6. The recording as prescribed above shall consist of data collected regularly on gross

turnover or revenue and or gross income as the basis for calculating amounts f tax

payable, including income that is classified as non-taxable object and final taxable

income. (http://en.wikipedia.org/wiki/Bookkeeping)

7. Books, records, and documents upon which the bookkeeping or recording is based

and other documents shall be kept for 10 (ten) years in Indonesia, at the place of

business activities or residences (for individual taxpayers) or at the place of domiciles

(for corporate taxpayers).

8. A taxpayer exempted from the obligation to maintain bookkeeping and recording is

not required attaches balance sheet and income statement on his Annual Income Tax

Return.

9. What meant by foreign language is English (Referred to in the Decree of Minister of

Finance No.543/KMK.04/2000).

2.1.4 Recording

1. Recording shall be carried out by an individual taxpayer who is engaged in business

activities or independent personal services and it permitted to calculate his net

income by using the Calculation norm (article 14 of the Law no. 17/2000).

10

2. Recording for one taxable year covering a period of 12 months starting on 1 January

to 31 December.

3. The recording shall prescribe the amount of gross turnover or revenue and or the

amount of gross income, as well as income that is classified as non-taxable object

and final taxable income, so that the amounts of tax payable can be calculated.

4. For a tax payer who has more than one business activity and place of business, the

recording shall describe the amount of gross turnover or revenue from each business

activity and place of business. (http://en.wikipedia.org/wiki/Recording)

II. 2 Tax Subject

Based on Article 2 paragraph (1) of Law No 7/1983 as last amended by Law No.

17/2000 on Income Tax (Income Tax Act-ITA), a tax subject consist of:

(a) an individual

(b) an undivided estate as a unit in lieu of the beneficiaries

(c) a body

(d) a permanent establishment

Tax subjects comprise both (a) resident and (b) non-resident Tax Subjects.

2.2.1 Resident Tax Subject

A Resident Tax Subject means:

1. An individual residing in Indonesia or presents in Indonesia for more than 183 days

in any 12 (twelve) month period, or an individual presents in Indonesia in a tax year

11

and intending to reside there in.

2. A company/corporate establish or domiciled in Indonesia.

3. An undivided estate as a unit in lieu of the beneficiaries.

A resident tax payer id subject to tax on income received or accrued in Indonesia

and outside Indonesia (worldwide income/global base/domiciliary base).

2.2.2 Non-Resident Tax Subject

A non-resident tax subject comprises:

1. An individual neither residing in Indonesia not present in Indonesia for more than

183 days in any 12 month period.

2. A body which is neither established nor domiciled in Indonesia.

That conducts business or carrying out activities through a permanent

establishment situated in Indonesia or that receives or accrues income from Indonesia

other than from conducting business or carrying our activities through a permanent

establishment in Indonesia.

A non-resident Taxpayer is subject to tax on income received or accrued in

Indonesia either through a permanent establishment in Indonesia or not (source base).

2.2.3 Permanent Establishment

A permanent establishment is a part of an enterprise operated by a Non-resident

tax subject. Based on Article 2 paragraph (5) of ITA, a permanent establishment is an:

12

Establishment used by an individual not residing in Indonesia for not more than

183 days in any 12 month period, or by a body which is not established or domiciled in

Indonesia to carrying business or engage in activities in Indonesia.

It may take the form of:

1. a place of management

2. a branch office

3. a representative office

4. an office building

5. a factory

6. a workshop

7. a place of mining and extraction of natural resources, and drilling in territory used

for mining exploration

8. a fishery, place of animal husbandry, farm, plantation or forestry

9. a construction, installation or assembly project

10. the furnishing of services through employee or other personnel, if performed for

more than 60 (sixty) days within 12 (twelve) month period

11. an individual or a body acting as a dependent agent

12. an agent or employee of an insurance company not established or domiciled in

Indonesia that collects premiums or covers risk in Indonesia.

For the countries concluding Tax Treaties negotiation with Indonesia, this

definition of permanent establishment may somewhat be modified by the Treaties.

13

II. 3 Income Tax Object

According to Article 4(1) ITA, a tax object shall income, meaning:

1. Any increase in economic capability received or derived by a Taxpayer.

2. Originating from within or outside Indonesia.

3. May be used for consumption or to increase the wealth of the Taxpayer concerned.

4. In whatever name and from, including:

a) Compensation or other remuneration received or accrued in respect of

employment or service such as salary, wage, allowance, honorarium,

commission, bonus, gratuity, pension or other remuneration, except where

stipulated otherwise in the income tax law of Indonesia;

b) Lottery prizes or gifts in respect of employment or other activities and awards;

c) Business profit;

d) Gains from the sale or transfer property, including:

1) Gains from the transfer of property to a corporation, a partnership, and

other entities in exchange for shares or capital contribution;

2) Gains accrued by a corporation, a partnership, and other entities from the

transfer of property to shareholders, partners or members;

3) Gains form a liquidation, merger, consolidation, expansion, split up or

acquisition;

4) Gains from the transfer of property in the form of grant, aid or donation,

except when given to relatives within one degree of direct lineage, or to

religious, educational or other social entities or to small business including

cooperatives as determined by Minister of Finance, provided that two

14

parties do not have any business relation, ownership nor control;

e) Refunds of tax payments already deducted as expenses;

f) Interest, including premiums, discounts and compensation for loan repayment

guarantees;

g) Dividends, in whatever name and form, including dividend paid by an

insurance company to policyholders and the distribution of net income by a

cooperative;

h) Royalties;

i) Rents and other income from the use of property;

j) Annuities;

k) Gains from discharge of indebtedness, except up to a certain amount stipulated

by Government Regulation;

l) Gains from revaluation of assets;

m) Insurance premiums;

n) Contribution received or accrued by an association from its members who are

taxpayers engaged in business or independent services;

o) An increase in net wealth from income which has not been taxed.

II. 4 Gross Income Deduction

According to Article 6 ITA, the express that may be deducted from gross income

constitute:

1. Expense to earn, collect and secure income, namely costs directly related to business

activity of which the income constitutes tax subject. Therefore, the expense used to

15

earn, collect and secure income not subject to tax or subject to final tax may not be

deductible from the gross income.

2. Contribution paid to a pension fund that has approved by the Minister of Finance (as

gross income deduction in connection with the individual taxpayer‘s remuneration).

3. Loss arising from the sale or transfer of property owned and used to earn, collect

and secure income.

4. Expenditures for research and development conducted in Indonesia.

5. Expenditure for scholarship, apprenticeship and training, by considering fairness

and the company‘s interest.

6. Non-taxable income, particularly applied to any individual taxpayer, is granted as

follows:

1) Rp 15,840,000, for the individual taxpayer concerned;

2) An addition of Rp 1,320,000, for a married taxpayer;

3) An addition of Rp 15,840,000, for a married taxpayer whose wife‘s income is

consolidated with the husband‘s;

4) An addition of Rp 1,320,000, for each family member by blood or marriage in

direct lineage, including an adopted child, that is fully dependant, for a

maximum of three individuals;

5) Member of the family by blood or marriage in direct lineage includes parents,

parent-in-law, children, or adopted children;

6) Family members who are fully dependant meaning family members who have

no income and whose entire living expenses are borne by the Taxpayer;

7) An addition of occupational expense, 5% amount of gross income, maximum

16

Rp 500,000 per month, Rp 6,000,000 per year.

8) An addition f employee contribution to Jamsostek for old age security savings,

2% amount of gross income, full amount.

9) An addition of pension maintenance expense, 5% of gross income, maximum

Rp 200,000 per month, 2,400,000 per year.

10) Taxpayer‘s status may consist of:

TK/... = not married, added with the number of family dependants;

(TK/0, TK/1, TK/2, or TK/3)

K/... = married, added with the number of family dependants;

(K/0, K/1, K/2, or K/3)

K/I/... = married, an additional for a wife whose income is annexed with

her husband‘s, added with the number of family dependants;

(K/I/1, K/I/2, or K/I/3)

PH = married taxpayer who has made written agreement on separation of

wealth and income;

HB/... = married taxpayer who has lived separately, number with the

amount of family dependants;

(HB/0, HB/1, HB/2, HB/3)

The calculation of Non-Taxable Income above shall be determined according to

the status of the taxpayer at the beginning of a year or at the beginning of part of tax

year. For instance, on January 1, 2005, the non-taxable income of Taxpayer ‗A‘ is a

married and has 1 child. Even though of Taxpayer ‗A‘ for tax 2005 remain collect on

17

the bases of the marital status of K/1 = Rp 15,840,000 + 1,320,000 + 1,320,000 = Rp

18,480,000. (Further added by the occupational expense, Jamsostek contribution and

pension maintenance expense)

II. 5 Salary

A salary is a form of periodic payment from an employer to an employee, which

may be specified in an employment contract. It is contrasted with piece wages, where

each job, hour or other unit is paid separately, rather than on a periodic basis. From the

point of a business, salary can also be viewed as the cost of acquiring human resources

for running operations, and is then termed personnel expense or salary expense. In

accounting, salaries are recorded in payroll accounts.

2.5.1 Gross Salary

Gross pay is what you make before any deductions. If a job is advertized at

$30,000 a year, then that's the gross pay.

2.5.2 Net Salary

Net salary is the remaining amount after deductions from the gross salary, where

net means ultimate. Example deductions: income taxes, trade union dues, authorized

deduction for a retirement fund. Net salary, sometimes referred to as "take-home pay",

is the amount left over after deductions from the gross salary. So gross pay of $30,000

would become something likes net pay of $22,564.

http://en.wikipedia.org/wiki/Employer

http://en.wikipedia.org/wiki/Employee

http://en.wikipedia.org/wiki/Employment_contract

http://en.wikipedia.org/wiki/Wage

http://en.wikipedia.org/wiki/Business

http://en.wikipedia.org/wiki/Human_resources

http://en.wikipedia.org/wiki/Business_Operations

http://en.wikipedia.org/wiki/Account_%28accountancy%29

http://en.wikipedia.org/wiki/Gross_%28economics%29

http://en.wikipedia.org/wiki/Salary

http://en.wikipedia.org/wiki/Net_%28economics%29

http://en.wikipedia.org/wiki/Income_tax

http://en.wikipedia.org/wiki/Trade_union

http://en.wikipedia.org/wiki/Retirement

18

CHAPTER III

METHOD OF DATA PROCESSING

AND COMPANY’S EXISTING CONDITION

III. 1 Data Collecting and Processing

3.1.1 Research Method

The research method in this thesis is also important to achieve the goals of this

research. In the research, the writer uses qualitative research approach with management

consultant engagement. The research emphasizes on one comparing the gross and net

method in calculating employee income tax by choosing a small size of samples. The

writer believed that the results of the analysis will be effective and beneficial for the

company.

In this study, the researcher tried to evaluate the accounting practice for employee

individual income tax in the company. The process of evaluation is central to qualitative

research because the writer choose the small size of employee payroll sample to

calculate the amount of individual income tax under gross and net method. Then the

researcher makes form to compare the results to see which method is more favorable for

the company perspective.

19

3.1.2 Research Instruments

Types of data

The type of data used in this research is the primary data and the secondary data;

which was collected from Jan 2011 until Mar 2011, and held in PT. Lematang Coal

Leatari which is located in Palembang, the province of Sumatra. According to Saunders

(2003) primary data is defined as new data that were collected specifically for research

purpose. On the other hand, the secondary data is defined as data that had already

collected for some other purpose beside the research purpose. Secondary data include

both raw data and published summaries.

1. Primary data

From the definition above, can be concluded that primary data is the data

collected in connection with the topic of the research, included history of the

company being studied, company‘s activities, payroll data, income tax data,

payroll documents, monthly tax return, and annual tax return, etc which were

specifically collected for this study purpose.

2. Secondary data

While the secondary data is the data that support the primary data, which

might be derived from any other literatures for the purpose of obtaining a

foundation basic and guidance in analyzing the data collected. The primary

usage of the secondary data is to document and obtain understanding of payroll

system, income tax, and the related accounting practice. The research also

20

looking for other data or materials used to support this thesis in library, such as

magazine, thesis, and also consult with the researcher‘s lectures, study from the

Indonesia Taxation, and etc.

Data collection

1. Field Research

The research was conducted by the writer by involving directly in the

company activities (especially in Accounting and Finance department) as the

object in this research. The methods of data collection are:

Observation (January 1, 2011 until March 31, 2011)

The writer collected the data by observing or monitoring directly to

the field. The observation is the systematic recording, description, analysis

and interpretation of people behavior.

Documentation

Documentation takes narrative form; the payroll form of all the

company‘s employees. It records all income tax matters in relation with the

employees‘ salaries. These documentations are required in order to obtain

and understand the payroll and tax payment information of the company.

Some examples of documentation are: payroll form, monthly SPT, and

annually SPT.

2. Library Research

The library research is conducted for the purpose of obtaining

secondary data which serve as the theoretical basic foundation for analyzing

the thesis‘s theme. In addition, library research also conducted for the purpose

21

of obtaining depth understanding about topic to support the analysis process.

3.1.3 Sampling Design

Size of the population

Since this research is done to examine the income tax for PT. Lematang Coal

Lestari, the population will be the salaries of all members, include the local and also the

foreign employee whether they are in senior manager, middle manager, or just

employee, in PT. Lematang Coal Lestari and also the taxable income of PT. Lematang

Coal Lestari.

Sampling technique applied

Since the population was very limited, only 105 (one hundred), in this study, in

order to make sure all kinds of data were involved in the sample, the purposive

sampling was used to obtain the sample. That means the researcher‘s sampling was very

purposive. The researcher selected the data which is unique and different with other,

means without duplication.

Actual computation of the sample

Since all sample are purposive selected and well organized, they are all actually

involved in the computation.

The actual sample size

The actual sample size is 10 (ten):

1. The General Manager, A

22

2. The Accounting Manager, B

3. One from the department managers, C

4. Three employees, D, E and F

5. One accounting staff, G

6. Two from drivers, H and I

7. One from security man, J

Which has covered all levels of employees in the company, and sufficient to

support the researcher‘s study.

3.1.4 Limitations

Since the writer is the accountant of the company, it is easier and convenient to

get the access to the data, and to get the permit of using the data even though it is highly

confidential. However, the writer still faced two problems:

Time Testing

According to Indonesia Tax law, the Indonesia taxpayer is an individual residing

in Indonesia or presents in Indonesia for more than 183 days in any 12 month period, or

an individual presents in Indonesia in a tax year and intend to reside there in. However,

the writer lack of access to the employee‘s Visa, Working Permit, KITAS and other

importer document, it is very difficult to use this time test. So the writer can only

assumed that they are all present residing in Indonesia, and has the intention to live in

Indonesia for more than 183 days.

23

Offshore Income

Another problem faced by the writer is the income source of General Manager,

Accounting Manager and other foreign employees who have offshore income. They

may have other income source which is very private and confidential, and unavailable to

get. The writer assumed they merely derive their income from Indonesia, without any

offshore income, due to the lack of information and distance factors.

24

III. 2 Company’s Existing Condition

3.2.1 Company Profile

PT. LEMATANG COAL LESTARI is young company which was founded in

September 2009 in Palembang, South Sumatra, Indonesia. It was invested by Chinese

people. The core business of LCL is to produce the coal.

The company has an open cut coal mine which is scheduled in production in July

2011 with an annual output of 2.3 million tons of coal. The company is a subsidiary

company of View Sino International Ltd. Actually the company is just a coal company

which only provides the coal to PT. GH EMM INDONESIA. While PT. GH EMM

INDONESIA is a power plant company which generates the power for Indonesia

Till the researcher leaved the company, it just has the pre-operational activities,

like making the legal foundation document, handling the foreign affairs, and also has

the construction activities, such as building the office and dormitory, construct the road

and strip the earth.

The company has about 150 employees. The researcher worked in Accounting &

Finance department, as the assistant of the finance manager. There are four people

including the researcher in the Accounting & Finance department. One is the finance

manager, one is cashier, and the other one is accountant and the researcher. The

researcher main job is deal with the taxes.

25

3.2.2 Organization Structure

Figure 3-1 The company organization structure

3.2.3 Current Tax Situation

In the company exists three foreign employee, one is the general manager, one is

the accounting manager and the researcher itself. All of these employees already stay in

Indonesia more than 183 days, so they are tax residents.

The closing date of operation is date 25 of each month. We calculate the salary

from date 25 to next date 25. And we pay the salary to employee in the end of each

month. We calculate PPh 21 by using net accounting method, so the company do not

withhold the tax from employee, the company will pay all the taxes.

26

CHAPTER IV

ANALYSIS AND EVALUATION

The data the researcher gathered are as follow

Table 4.1 The sample payroll data

No. Name Position Salary Status

1 A General Manager Rp 13,000,000 TK

2 B Accounting Manager Rp 10,000,000 K/1

3 C Department Manager Rp 8,000,000 K/2

4 D Employee Rp 5,000,000 TK

5 E Employee Rp 5,000,000 K/1

6 F Employee Rp 4,000,000 K/0

7 G Accountant Rp 6,000,000 TK

8 H Driver Rp 2,000,000 K/2

9 I Driver Rp 2,000,000 K/3

10 J Security Man Rp 1,500,000 K/1

27

IV.1 General Manager (A)

The Indonesia general manager‘s monthly salary is Rp13, 000,000; and no

marries, no dependant. Usually in LCL, salary was payable on date 25 in each month.

So, the researcher makes the following journal entry:

Here is the journal under net method:


method



Employee income tax expense 1,447,000


Tax Payable-PPh21 1,447,000

To record the salary and tax


Cash-Rp 13,000,000

To pay the salary

10 Mar, 2011 Tax Payable-PPh21 1,447,000

Cash-Rp 1,447,000

To deposit the income tax to the

bank

28

Here is the form to calculate the employee income tax under net method:

Table 4.3 The net calculation of PPh21 for the Indonesia general manager (TK)

Item month annualize

Salary 13,000,000 12 156,000,000

Gross-up salary 14,742,000 12 176,904,000

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 500,000 12 6,000,000

Jamsostek 295,000 12 3,540,000

pension 200,000 12 2,400,000

PKP 12,427,000 12 149,124,000

PPh21 1,447,000 12 17,364,000

Take home salary 13,000,000 12 156,000,000

As we can see from the table, the Indonesia general manager individual income

tax PPh 21 is Rp 1,447,000, take home salary is Rp 13,000,000.

I use the software‖JST-PPH21‖ to calculate this tax. This software is made by me

and my friend; I tell him how to calculate the PPh21 and the process to calculate it. We

cost one month to finish this software. In this software we use two important forms

which relate to the PPh21.

29

Most income earned by individual tax residents is subject to income tax at the

following normal tax rates:

Table 4.4 Normal Tax Rate applicable to Individual Taxpayers

Taxable Income Rate Tax Rp.

On the first Rp 50,000,000 5% 2,500,000

On the next Rp 200,000,000 15% 30,000,000

On the next Rp 250,000,000 25% 62,500,000

On the next amount of over Rp 500,000,000 30% 30% of the relevant amount

Annual non-taxable incomes (PTKP) for resident individuals are as follows:

Table 4.5 Non-taxable incomes for Individual Taxpayers

Rp.

Taxpayer 15,840,000

Spouse 1,320,000

Each dependant (max. of 3) 1,320,000

Occupational expense (5% of gross income, max. Rp 500,000/month) 6,000,000

Employee contribution to Jamsostek for old age security savings (2% of

gross income)

Full amount

Pension maintenance expense (5% of gross income max. Rp

200,000/month)

2,400,000

30

If we consider the salary of Rp 13,000,000 as net, the Tunjangan Pajak (PPh21)

will be consider as fringe benefit, it is a part of the salary, consequently, the Tax Base

will not be Rp 13,000,000 anymore. The Tax Base is the net salary plus the Tunjangan

Pajak. Then I use the software ―JST-PPH21‖ to calculate the tax.

In order to know the individual income tax under gross method, I calculate as

below:

Table 4.6 The Gross method calculation of PPh 21 for the General Manager (TK)

Item month

annualize

salary 13,000,000 12 156,000,000

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 500,000 12 6,000,000

Jamsostek 260,000 12 3,120,000

pension 200,000 12 2,400,000

PKP 10,720,000 12 128,640,000

PPh21 1,191,000 12 14,292,000

Take home salary 11,809,000 12 141,708,000

31

So the journal entries will be like these:

Table 4.7 Journal Entries to record the payment of salary and PPh21 by using

gross method




Tax Payable 1,191,000

To record the salary expense


Cash-Rp 11,809,000

To pay the monthly salary

10 Mar, 2011 Salary Payable 1,191,000

Cash-Rp 1,191,000

To pay the general manager‘s PPh21

So we can summarize as following:

Table 4.8 The summary of PPh 21 calculation for the General Manager

13,000,000 TK Take home Gross-Up salary PPh21

Gross 11,809,000 13,000,000 1,191,000

Net 13,000,000 14,742,000 1,447,000

So the gross method will be pay less individual income tax (PPh21) provided that

the monthly salary is Rp 13,000,000 and the status is TK.

How about other samples? The researcher will exam one by one.

32

IV.2 Accounting Manager (B)

For B, the accounting manager, his monthly salary is 10,000,000, and the status is

K/1 (married, one dependant). We use the same software to calculate the PPh21 under

gross method; the result will be as followed:

Table 4.9 The Gross calculation of PPh21 for the accounting manager (K/1)

Item month

annualize

salary 10,000,000 12 120,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 500,000 12 6,000,000

Jamsostek 200,000 12 2,400,000

pension 200,000 12 2,400,000

PKP 7,560,000 12 90,720,000

PPh21 717,333 12 8,607,996

Take home salary 9,282,667 12 111,392,094

33

If we calculate the PPh21 under the net method, the result will be as followed:

Table 4.10 The Net calculation of PPh21 for the accounting manager (K/1)

Item month

annualize

Salary 10,000,000 12 120,000,000

Gross-up Salary 10,840,953 12 130,091,436

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 500,000 12 6,000,000

Jamsostek 216,819 12 2,601,829

pension 200,000 12 2,400,000

PKP 8,384,134 12 100,609,607

PPh21 840,953 12 10,091,436

Take home salary 10,000,000 12 120,000,000

Here is the summary for K/1, monthly income Rp 10,000,000

Table 4.11 The summary of PPh21 calculation for Accounting Manager

10,000,000 K/1 Take home Gross-Up salary PPh21

Gross 9,282,667 10,000,000 717,333

Net 10,000,000 10,840,953 840,953

Obviously, the gross method will pay less individual income tax (PPh21)

provided that the monthly salary is Rp 10,000,000 and the status is K/1.

34

IV.3 Department Manager (C)

For C, the department manager, his monthly salary is 8,000,000, and the status is

K/2 (married, two dependants). We use the same software to calculate the PPh21 under


Table 4.12 The Gross calculation of PPh21 for the department manager (K/2)

Item month

annualize

salary 8,000,000 12 96,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 220,000 12 2,640,000

occupation 400,000 12 4,800,000

Jamsostek 160,000 12 1,920,000

pension 200,000 12 2,400,000

PKP 5,590,000 12 67,080,000

PPh21 421,833 12 5,061,996

Take home salary 7,578,167 12 90,938,004

35


Table 4.13 The Net calculation of PPh21 for the department manager (K/2)

Item month

annualize

Salary 8,000,000 12 96,000,000

Gross-up salary 8,490,218 12 101,882,616

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 220,000 12 2,640,000

occupation 500,000 12 6,000,000

Jamsostek 169,804 12 2,037,652

pension 200,000 12 2,400,000

PKP 5,970,414 12 71,644,964

PPh21 490,218 12 5,882,616

Take home salary 8,000,000 12 96,000,000


Table 4.14 The summary of PPh21 calculation for Department Manager


Gross 7,578,167 8,000,000 421,833

Net 8,000,000 8,490,218 490,218



36

IV.4 Employee (D)

For D, the employee, his monthly salary is 5,000,000, and the status is TK (no

spouse, no dependant). We use the same software to calculate the PPh21 under gross

method; the result will be as followed:

Table 4.15 The Gross calculation of PPh21 for the Employee D (TK)

Item month

annualize

salary 5,000,000 12 60,000,000

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 250,000 12 3,000,000

Jamsostek 100,000 12 1,200,000

pension 200,000 12 2,400,000

PKP 3,130,000 12 37,560,000

PPh21 156,500 12 1,878,000

Take home salary 4,843,500 12 58,122,000

37


Table 4.16 The Net calculation of PPh21 for the Employee D (TK)

Item month

annualize

Salary 5,000,000 12 60,000,000

Gross-up salary 5,164,312 12 61,971,744

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 258,206 12 3,098,472

Jamsostek 103,286 12 1,239,435

pension 200,000 12 2,400,000

PKP 3,282,820 12 39,393,837

PPh21 164,132 12 1,969,584

Take home salary 5,000,000 12 60,000,000

Here is the summary for TK, monthly income Rp 5,000,000

Table 4.17 The summary of PPh21 calculation for Employee D


Gross 4,843,500 5,000,000 156,500

Net 5,000,000 5,164,312 164,132


provided that the monthly salary is Rp 5,000,000 and the status is Tk.

38

IV.5 Employee (E)

For E, the employee, his monthly salary is 5,000,000, and the status is K/1

(married, one dependant). We use the same software to calculate the PPh21 under gross


Table 4.18 The Gross calculation of PPh21 for the Employee E (K/1)

Item month

annualize

salary 5,000,000 12 60,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 250,000 12 3,000,000

Jamsostek 100,000 12 1,200,000

pension 200,000 12 2,400,000

PKP 2,910,000 12 34,920,000

PPh21 145,500 12 1,746,000

Take home salary 4,854,500 12 58,254,000

39


Table 4.19 The Net calculation of PPh21 for the Employee E (K/1)

Item month

annualize

Salary 5,000,000 12 60,000,000

Gross-up salary 5,152,595 12 61,831,140

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 257,629 12 3,091,548

Jamsostek 103,052 12 1,236,623

pension 200,000 12 2,400,000

PKP 3,051,914 12 36,622,969

PPh21 152,595 12 1,831,140

Take home salary 5,000,000 12 60,000,000


Table 4.20 The summary of PPh21 calculation for Employee E


Gross 4,854,500 5,000,000 145,500

Net 5,000,000 5,152,595 152,595



40

IV.6 Employee (F)

For F, the employee, his monthly salary is 4,000,000, and the status is K/0

(married, no dependants). We use the same software to calculate the PPh21 under gross


Table 4.21 The Gross calculation of PPh21 for Employee F(K/0)

Item month

annualize

salary 4,000,000 12 48,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant - 12 -

occupation 200,000 12 2,400,000

Jamsostek 80,000 12 960,000

pension 200,000 12 2,400,000

PKP 2,090,000 12 25,080,000

PPh21 104,500 12 1,254,000

Take home salary 3,895,500 12 46,746,000

41


Table 4.22 The Net calculation of PPh21 for the Employee F (K/0)

Item month

annualize

salary 4,000,000 12 48,000,000

Gross-up salary 4,109,596 12 49,315,152

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant - 12 -

occupation 205,478 12 2,465,736

Jamsostek 82,192 12 986,303

pension 200,000 12 2,400,000

PKP 2,191,926 12 26,303,113

PPh21 109,596 12 1,315,152

Take home salary 4,000,000 12 48,000,000


Table 4.23 The summary of PPh21 calculation for Employee F


Gross 3,895,500 4,000,000 104,500

Net 4,000,000 4,109,596 109,596



42

IV.7 Accountant (G)

For G, the accountant, his monthly salary is 8,000,000, and the status is TK (no

spouse, no dependant). We use the same software to calculate the PPh21 under gross


Table 4.24 The Gross calculation of PPh21 for the accountant (TK)

Item month

annualize

salary 6,000,000 12 72,000,000

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 300,000 12 3,600,000

Jamsostek 120,000 12 1,440,000

pension 200,000 12 2,400,000

PKP 4,060,000 12 48,720,000

PPh21 203,000 12 2,436,000

Take home salary 5,797,000 12 69,564,000

43


Table 4.25 The Net calculation of PPh21 for the accountant (TK)

Item month

annualize

salary 6,000,000 12 72,000,000

Gross-up salary 6,223,513 12 74,682,156

PTKP 1,320,000 12 15,840,000

spouse - 12 -

dependant - 12 -

occupation 311,175 12 3,734,100

Jamsostek 124,470 12 1,493,643

pension 200,000 12 2,400,000

PKP 4,267,868 12 51,214,413

PPh21 223,513 12 2,682,156

Take home salary 6,000,000 12 72,000,000

Here is the summary for TK, monthly income Rp 6,000,000

Table 4.26 The summary of PPh21 calculation for Accountant


Gross 5,797,000 6,000,000 203,000

Net 6,000,000 6,223,513 223,513


provided that the monthly salary is Rp 6,000,000 and the status is TK.

44

IV.8 Driver (H)

For H, the Driver, his monthly salary is 2,000,000, and the status is K/2 (married,

two dependants). We use the same software to calculate the PPh21 under gross method;

the result will be as followed:

Table 4.27 The Gross calculation of PPh21 for the Driver H (K/2)

Item month

annualize

salary 2,000,000 12 24,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 220,000 12 2,640,000

occupation 100,000 12 1,200,000

Jamsostek 40,000 12 480,000

pension 100,000 12 1,200,000

PKP 110,000 12 1,320,000

PPh21 5,500 12 66,000

Take home salary 1,994,500 12 23,934,000

45


Table 4.28 The Net calculation of PPh21 for the Driver H (K/2)

Item month

annualize

salary 2,000,000 12 24,000,000

Gross-up salary 2,005,753 12 24,069,036

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 220,000 12 2,640,000

occupation 100,287 12 1,203,444

Jamsostek 40,115 12 481,381

pension 100,287 12 1,203,444

PKP 115,064 12 1,380,767

PPh21 5,753 12 69,036

Take home salary 2,000,000 12 24,000,000


Table 4.29 The summary of PPh21 calculation for Driver H


Gross 1,994,500 2,000,000 5,500

Net 2,000,000 2,005,753 5,753



46

IV.9 Driver (I)

For I, the driver, his monthly salary is 2,000,000, and the status is K/3 (married,

three dependants). We use the same software to calculate the PPh21 under gross method;

the result will be as followed:

Table 4.30 The Gross calculation of PPh21 for the Driver I (K/3)

Item month

annualize

salary 2,000,000 12 24,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 330,000 12 3,960,000

occupation 100,000 12 1,200,000

Jamsostek 40,000 12 480,000

pension 100,000 12 1,200,000

PKP - 12 -

PPh21 - 12 -

Take home salary 2,000,000 12 24,000,000

47


Table 4.31 The Net calculation of PPh21 for the Driver I (K/3)

Item month

annualize

salary 2,000,000 12 24,000,000

Gross-up salary 2,000,000 12 24,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 330,000 12 3,960,000

occupation 100,000 12 1,200,000

Jamsostek 40,000 12 480,000

pension 100,000 12 1,200,000

PKP - 12 -

PPh21 - 12 -

Take home salary 2,000,000 12 24,000,000


Table 4.32 The summary of PPh21 calculation for the Driver H


Gross 2,000,000 2,000,000 0

Net 2,000,000 2,000,000 0

Obviously, there is no individual income tax (PPh21) provided that the monthly

salary is Rp 2,000,000 and the status is K/3.

48

IV.10 Security man (J)

For J, the department security man, his monthly salary is 1,500,000, and the status

is K/1 (married, one dependant). We use the same software to calculate the PPh21 under


Table 4.33 The Gross calculation of PPh21 for the Security man (K/1)

Item month

annualize

Take home 1,500,000 12 18,000,000

salary 1,500,000 12 18,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 75,000 12 900,000

Jamsostek 30,000 12 360,000

pension 75,000 12 900,000

PKP - 12 -

PPh21 - 12 -

49


Tab le 4.34 The Net calculation of PPh21 for the Security man (K/1)

item month

annualize

Take home 1,500,000 12 18,000,000

salary 1,500,000 12 18,000,000

PTKP 1,320,000 12 15,840,000

spouse 110,000 12 1,320,000

dependant 110,000 12 1,320,000

occupation 75,000 12 900,000

Jamsostek 30,000 12 360,000

pension 75,000 12 900,000

PKP - 12 -

PPh21 - 12 -


Table 4.35 The summary of PPh21 calculation for Security man


Gross 1,500,000 1,500,000 0

Net 1,500,000 1,500,000 0

Obviously, there is no individual income tax (PPh21) provided that the monthly

salary is Rp 1,500,000 and the status is K/1.

50

So we can summarize as following:

Figure 4-1The comparison of Gross and Net calculation of PPh21

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

gross

net

As so far, we can conclude that the gross method always pay less employee

individual income tax. Only if there is no individual tax, using gross or net method does

not matter again.

Monthly salary

PPh 21

51

Table 4.36 The comparison of gross and net method in the current situation

Position Monthly Salary Status

Annual salary payment to

employees Annual employee individual

Income Tax

Referred to

table gross method net method gross method net method

General Manager 13,000,000 TK 141,708,000 156,000,000 14,292,000 16,759,668 4.3 & 4.6

Accounting Manager 10,000,000 K/1 111,392,004 120,000,000

8,607,996 10,091,436 4.9 & 4.10

Department Manager 8,000,000 K/2 90,938,004 96,000,000 5,061,996 5,882,616 4.12 & 4.13

Employee 5,000,000 TK 58,122,000 60,000,000

1,878,000 1,969,584 4.15 & 4.16

Employee 5,000,000 K/1 58,254,000 60,000,000

1,746,000 1,831,140 4.18 & 4.19

Employee 4,000,000 K/0 46,746,000 48,000,000

1,254,000 1,315,152 4.21 & 4.22

Accountant 6,000,000 TK 69,564,000 72,000,000 2,436,000 2,682,156 4.24 & 4.25

Driver 2,000,000 K/2 23,934,000 24,000,000 66,000 69,036 4.27 & 4.28

Driver 2,000,000 K/2 23,934,000 24,000,000 66,000 69,036 4.27 & 4.28

Total 624,592,008 660,000,000 35,407,992 40,669,824

Discrepancy (Saving) Rp 5,261,832

52

CHAPTER V

CONCLUSION AND RECOMMENDATION

V.1 Conclusion

Currently, the company is using the net method to calculate all employees’ income

tax. The income tax was paid by the company. The reason why the company uses net

method is because the manager and accounting staff lack of knowledge. Since there are

no production activities, all expense including the employee income tax expense will be

capitalized as a pre-operational asset, which is a kind of intangible assets. Under the

Indonesian GAAP, intangible assets are amortizable assets. So in the following years,

the company will amortize the asset and use the straight line method. The amortization

expense by using the straight method is being considered as deductible expense from

tax accounting perspective.

Since in current situation, the company has no production activities, the annual

income is 0; and based on the analysis in chapter IV, by using the net and the gross

method to calculate the amount of employee individual tax payment, we got that the

gross method will pay less employee individual income tax. By using the gross method,

the company will save cash Rp 5,261,832; it is good for the company operation.

We can see that by using the gross method, the company will pay less employee

income tax and less salary payable from Table 4.36 in chapter four.

53

V.2 Recommendation

1. Based on the conclusion, we know that the gross method will lead less employee

individual income tax payment and save cash for the company, so it is better for the

company to shift the net method to gross method in calculating and reporting its

income tax. The gross method should be more favorable for the company in current

situation.

2. The company should train its finance staff, especially, they whose job is related to

tax, for taxation. Buy some accounting books and let the finance staff to learn.

54

Reference

Bookkeeping from http://www.villagevolunteers.org/wp-content/uploads/2011/06/

Basic-Bookkeeping.pdf and http://en.wikipedia.org/wiki/Bookkeeping

Indonesian Tax Facts (2009) from http://rsm.aajassociates.com/download/articles/2009/

Indonesian_Tax_Facts_June_2009.pdf

Indonesian Pocket Tax Book 2011 from http://www.pwc.com/id/en/indonesian-pocket-

tax-book/assets/Indonesian-Poket-Tax-Book_2011.pdf

Individual Personal Income Tax in Indonesia from http://www.expat.or.id/info/individua

lincometaxes.html

Indonesia Tax Review from http://indonesiataxreview.blogspot.com/2010/11/personal-

income-tax-calculation-using_03.html

Recording from http://en.wikipedia.org/wiki/Recording

Rahmat Bastian and Satrya Wijaya Teja (2005). Income Tax In Indonesia. Jakarta: BT

Partnership

Tax law basis from Consolidation of Law of the Republic of Indonesia Number 6 of

1983 Concerning General Provisions and Tax Procedure as lastly amended by law

Number 28 of 2007 and Consolidation of Law of the Republic of Indonesia

Number 7 of 1983 Concerning Income Tax as lastly amended by law Number 36 of

2008;

Taxation and Investment Indonesia 2011 from http://www.deloitte.com/assets/Dcom-

Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Gu

ides/2011/dttl_tax_guide_2011_Indonesia.pdf

http://www.villagevolunteers.org/wp-content/uploads/2011/06/%20Basic-Bookkeeping.pdf

http://www.villagevolunteers.org/wp-content/uploads/2011/06/%20Basic-Bookkeeping.pdf

http://en.wikipedia.org/wiki/Bookkeeping

http://rsm.aajassociates.com/download/articles/2009/%20Indonesian_Tax_Facts_June_2009.pdf

http://rsm.aajassociates.com/download/articles/2009/%20Indonesian_Tax_Facts_June_2009.pdf

http://www.pwc.com/id/en/indonesian-pocket-%20tax-book/assets/Indonesian-Poket-Tax-Book_2011.pdf

http://www.pwc.com/id/en/indonesian-pocket-%20tax-book/assets/Indonesian-Poket-Tax-Book_2011.pdf

http://www.expat.or.id/info/individua%20lincometaxes.html

http://www.expat.or.id/info/individua%20lincometaxes.html

http://indonesiataxreview.blogspot.com/

http://indonesiataxreview.blogspot.com/2010/11/personal-%20income-tax-calculation-using_03.html

http://indonesiataxreview.blogspot.com/2010/11/personal-%20income-tax-calculation-using_03.html

http://en.wikipedia.org/wiki/Recording

http://www.deloitte.com/assets/Dcom-%20Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2011/dttl_tax_guide_2011_Indonesia.pdf



55

Payroll from http://www.principlesofaccounting.com/chapter12/chapter12.html

http://www.principlesofaccounting.com/chapter12/chapter12.html

si抬

COAL M1N1NGomGe∶ Gu.ung瑚△Dusuu Ⅲ Kec Rnmbang Dan驷 Muara Enim

sumatera selatan

Emai⒈ km献aIl熙o破⒄vahoo.comPo。 Box123PrabumuⅡ h31100

COMPANY’ s CONFIRMATION LETTERHere1v、

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[L,I征Ⅱ

Nazne∶

Fmction:

Company∶

Address:

ConfIl.Ⅱs吐n⒈

Ye Hongnang

Ac∞m娩 ∷Manager

P⒒ Lematang Coal Les咖

Palembang,Indone蛀a

Thn Hongliang

008200800053

Na1ne:

smdentID∶

FE1Gl】111,勹 -lv刂lljor Acco1mthg

U1rljivα哎饣: President UⅡvers”

Has done 11is/her research in ol】 r company Ⅱl order tO wnte the Thesis, tit1e :

“EVALUATION OF TⅡ E NET AND GROss ACCO11NTING METⅡ oD To

CALCULATE TⅡE INCOME TAX PPⅡ 21 IN PT。 LEMATANG CoAL

LEsTARI’’ sh⒑e5Nov,2011 un吐 1 15Nov,2011,and has discussed wIth us the

content ofh吐 s/her Thesis,1nchk旺ng the fI洫gs and1eGoⅡⅡn蛐 tions。

Palembang,201⒈ 1卜 15

PT。 Lematang Coal Lest泛 1JΓi

AGcounung Manager

56

57

RESUME

PERSONAL DETAILS

Name: Tian Hongliang

Current Address: PU Student Housing, Ki Hajar Dewantara Street, Cikarang Baru

Phone: 085814316897,

Email: [email protected]

Place/DoB: Sichuan, China/ Sep 12, 1989

Nationality: Chinese

Gender: Male

EDUCATION

President University, Indonesia 2008.8 – 2012.2

Le Shan Yi Zhong senior high school 2005.8 - 2008.6

EXPERIENCE

December 2009 - February 2010:

I was hired to work as a part time English teacher to teach Chinese women basic

English by Everyday Mandarin.

January 2010 - February 2010

I was the chairman to organize the 2010 Spring Festival Celebration at President

University.

Organized Ping -Pong Club in President University

Private mandarin teacher during 2009

Year 2010 Aug - Oct, work as a journalist under International Daily Group (GUO JI

RI BAO)

2011 JAN - Mar, work as an assistant of finance manager in PT. LCL

2011 Mar - Now, work as the Indonesia Market Supervisor in Nanjing Essence

SKILLS

Able to use Microsoft Office

Proficiency in using Chinese & English; both written and oral. Can use simple

Indonesian language

Able to adapt to new surroundings and learn fast

Able to write simple Chinese poem

ACHIEVEMENTS

Full scholarship at Pesident University

Be independent since 15 years old

mailto:[email protected]

58

INTERESTS AND HOBBIES

Communicating

Reading

PERSONAL CHARACTERS

Self-motivated

self-independent

confident

creative

loyal

friendly

honest

strict