A person’s income is dependent on more than only their earnings through employment in businesses or institutions. Many people prefer to work alone and don’t want to collaborate with others. Of course in line with the area in which they have grown to be experts. This is what freelance work entails. But, do you know that there is a freelance tax that needs to be paid for this profession?
All professions, including independent contractors, are expected to understand taxes. Therefore, ordinary employees are not the only ones who must pay taxes. Additionally, a freelancer has to be familiar with taxes. The fundamental problem, though, is whether a freelancer must also pay taxes. Despite the broad definition of freelancing, there is one crucial element to understand. In essence, the general public’s perception of freelancing differs greatly from that of the tax industry. For further explanation about freelance tax, especially in Indonesia, see the following overview.
About Freelance Tax
Independent contractors have a wide range of resources that may be employed in tax computations. The Net Income Calculation Norm, however, is the primary legal source. Online Tax made this information known. Taxes owed by independent contractors are calculated using the fundamental norm.
Net revenue will then be multiplied by annual freelancing gross income. The Income Tax Regulations specify the amount of income tax that independent contractors must pay. Freelancers must first fulfill several prerequisites, such as the following, before using this.
Individual Taxpayers who, following Article 14 of Law Number 36 of 2008 Concerning Income Tax and PP Number 46 of 2013, get gross turnover income or gross turnover of not more than 4,800,000,00 IDR in a single tax year.
Individual Taxpayers must inform the Director General of Taxes or the closest Tax Service Office during the first three months of the applicable tax year if they want to use the Net Income Calculation Norm in computing their net income.
Additionally, according to the government, independent contractors need to be aware of the income that will be subject to deductions under the regulations governing Taxable Income and Non-Taxable Income.
The Purpose of Freelance Tax
Since taxes are a source of state money that is used to fund all expenditures, including development expenditures, they play a crucial role in the functioning of the state. The following are numerous tax-related functions for the country.
Budgetary Purpose
Taxes serve as a means of funding government spending as a source of state revenue. The state requires money to carry out its regular duties and development. Tax money can be used to pay for this charge. Taxes are now utilized for regular finance, including salaries, purchases of commodities, maintenance, and other expenses.
Money is taken from government savings, or domestic earnings less regular expenses, to finance development. To meet the growing need for development finance, this government must boost its annual savings, and this is most anticipated by the tax sector.
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Set Function
Through tax laws, the government may control economic growth. Taxes can regulate, making them a tool for achieving objectives. For instance, numerous tax relief facilities are offered to promote investment both locally and internationally. The government places hefty import taxes on foreign goods to safeguard home producers.
Function of Stability
Taxes give the government the money it needs to implement price stability programs, which helps to keep inflation under control.
The Function of Income Redistribution
The state will utilize the revenue it has collected to pay for all public interests, including development that will lead to more employment opportunities and higher wages for everyone.
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Calculating Freelance Tax
It’s not as tough as you may think to figure out the tax on side income (work done outside of your primary employment); independent contractors can do it by following the calculation norm. The Government based the calculating norm’s amount on the nature of the activity or business. Three groups comprise the proportion of norms for individual taxpayers, namely:
- Provincial Capitals in Ten (Jakarta, Bandung, Medan, Palembang, Semarang, Surabaya, Denpasar, Manado, Makassar and Pontianak)
- A Different Province’s Capital
- Other regions
In the field of taxes, there are some independent careers, including scholars, writers, and translators, supervisors, insurance representatives, athletes, intermediary advertising agencies. Other professions including notaries, actuaries, attorneys, consultants, accountants, physicians, architects, and appraisers are examples of experts. Plus, there are some other professions that not completely mention here.
Sample of Freelance Tax Calculation
Mr. X is not married and works as a freelancer at DKI Jakarta. His monthly income is IDR 10 million from this profession. To calculate taxes, he can use the Net Income Calculation Norm (NPPN) with the following formula:
- Net Income: Gross Income in a year x 50% (D.K.I. Jakarta)
- Net Income: IDR 120,000,000 x 50% = IDR 60,000,000
- Taxable Income (PKP): Net Income – PTKP
- Taxable Income (PKP): IDR 60,000,000 – Rp54,000,000 (PTKP Individual Taxpayer) = IDR 6.000.000
- PPh 21 to be paid in a year: 5% x IDR 6.000.000 = IDR 300.000.
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That’s all about tax law and how to calculate it that freelance workers need to know. With the information above, freelance workers should start calculating the income they receive. Check the amount of freelance tax that must be paid and don’t forget the tax obligation for the state.
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