Direct Tax: Definition, Types, and Complete Examples

Direct Tax, as explained by Indonesia’s Financial Services Authority (OJK), is a tax that is periodically charged to individuals or legal entities based on a tax assessment letter. This type of tax must be borne directly by the taxpayer. In English, it is called direct tax.

According to Wikipedia, a direct tax is a tax that cannot be transferred to or borne by another person. In other words, the taxpayer and the tax bearer are the same entity.

Definition of Direct Tax

Direct tax refers to a tax that is the responsibility of the taxpayer and cannot be transferred to another party. It is collected in a structured and scheduled manner.

Under prevailing tax laws, taxpayers are obliged to pay direct taxes as long as they meet the specified requirements.

Examples of Direct Tax

1.  Income Tax (PPh)

This is a tax imposed on the income earned by individuals or entities over a one-year period. Taxpayers include individuals with regular income and registered businesses with legal permits.

2. Land and Building Tax (PBB)

PBB is a tax imposed based on ownership of land and buildings. The amount depends on the location and size of the property, making it a property-based tax.
Taxpayers include individuals or businesses who own, benefit from, or control the land and/or buildings.

The Tax Due Notification Letter (SPPT) is issued to taxpayers and contains the tax amount, payment deadline, and payment instructions.

The amount of PBB is determined based on the Sales Value of Tax Object (NJOP) of the property.

3. Motor Vehicle Tax

This tax is applied to motor vehicle ownership, such as motorcycles, cars, etc.
Taxpayers are individuals or entities that own motor vehicles.

The tax amount is based on the selling value of the vehicle and its potential to cause road damage and environmental pollution.

Differences Between Direct and Indirect Tax

Taxes are classified into various types, one of which is based on how they are paid, either direct or indirect tax.
To better understand direct taxes, it’s important to distinguish them from indirect taxes.

Here are the main differences:

1. Taxpayer Identity

• Direct Tax: The registered individual or business is the one responsible for paying the tax.
• Indirect Tax: The tax may be passed on to another party. The name listed on the tax record may be someone other than the actual tax bearer.

2. Tax Assessment Letter

• Direct Tax: Comes with a formal tax assessment letter (SKP) detailing payment rules and amounts. A Tax Return (SPT) is also issued with the payment breakdown.
• Indirect Tax: No tax assessment letter is issued. The rules and rates are already governed by legislation.

3. Government Perspective

• Direct Tax: Has a direct impact on economic indicators like inflation. It is collected in regular cycles and considered a progressive tax, where higher income means higher tax.
• Indirect Tax: The government expects steady revenue from all layers of society. It is primarily used for long-term economic development.

How to Pay Direct Taxes – Example: Income Tax

There are several ways to pay direct taxes in Indonesia. One common method is making a direct deposit at a bank teller or post office.

Via Bank Teller or Post Office

Taxpayers only need to present a 15-digit billing ID, which can be read in the MPN G2 system at the bank or post office. You can get the billing code by registering online via www.pajak.go.id or through the OnlinePajak app, which is an official channel authorized by the government.

Before this system, taxpayers had to use an SSP (Tax Payment Form), which was manual and time-consuming for both taxpayers and bank/post office staff.

Thanks to the modern integrated system, direct tax payments like income tax (PPh) are now simpler and faster. Taxpayers only need to present their billing ID, no need to manually input NPWP or ID card numbers.

That wraps up the explanation on direct taxes, from definition to examples. If you still have questions or want to share your thoughts on this topic, feel free to drop them in the comments section below!