- How to Calculate Tax for Freelancers

How to Calculate Tax for Freelancers

  • Administrator
  • Rabu, 15 Mei 2019 | 17:00 WIB
  Illustration. Photo source: Istimewa

All professions, including freelancers, are required to be tax literate because tax is not only applied to regular employees. A freelancer needs to understand the details of tax.

Presently, income received by a person is not only based on income from a job in a company or institution. Many people choose not to work with other people and wish to work alone. Of course, the work is in accordance with their field of expertise. This is called as freelance.

All professions, including freelancers, are required to be tax literate because tax is not only applied to regular employees. A freelancer needs to understand the details of tax. However, the fundamental question is that whether a freelancer is also obligated to pay tax? Even though freelance has a broad definition, there is one main matter that needs to be known. Basically, laymen’s understanding of freelance is distinctly different with the understanding of freelance in taxing.

In taxing, freelancer remains to be considered as an occupation even though there is no attachment to a certain company or institution. This is because freelancers basically generate money from work. Therefore, tax is imposed upon freelancer and they also need to file their tax return annually.

 There are several freelance professions in taxing, namely:

  • Researcher, writer, and translator.
  • Supervisor.
  • Insurance agent.
  • Athlete.
  • Advertisement agent.
  • Mediator.
  • Overseer.
  • Expert, such as notary, actuary, lawyer, consultant, accountant, doctor, architect, and assessor.
  • Teacher, instructor, lecturer, and advisor.
  • Dancer, theater actor, commercial star, musician, comedian, soap opera star, director, film crew, singer, model, and host.
  • Multilevel marketing, direct selling, and its kind.
  • Goods seller.

If a person works in a company, the tax is deducted by the company and the proof of tax deduction is provided by the company. It is different with side income. How to calculate tax for side income? Considering that most of side income is not fixed every month and there is no proof showing the amount of side income.

The reporting of such income is only based on calculation of taxpayer’s income, because freelancer uses Self-Assessment system. This system allows taxpayers to calculate, pay, and report tax payable on income for 1 (one) tax year.

Characteristics of Self-Assessment are:

  1. Tax payable is self-calculated by taxpayers.
  2. After taxpayers calculate the tax for their income, taxpayers are required to pay and report the tax on their own.
  3. The government does not need to issue tax assessment at any time. Tax assessments are issued by the government at certain times only (for example, when taxpayers are late in reporting the Annual Personal Income Tax Returns or when taxpayers fail to pay tax payable).

Calculating Freelancer Tax

Self-calculating of tax on side income (work outside of main work) is not as hard as it is imagined to be. Freelancers can calculate it using calculation norm. The amount of calculation norm has been determined by the government based on types of occupation or business. The norm percentage of individual taxpayer is divided into 3 groups, namely:

  1. 10 Provincial Capital (Jakarta, Bandung, Medan, Palembang, Semarang, Surabaya, Denpasar, Manado, Makassar, and Pontianak).
  2. Other Provincial Capitals
  3. Other Regions.

Freelance Tax Calculation Example

Ridwan is single and work as a legal consultant in Jakarta. Ridwan’s monthly income is at Rp10 million from the profession.

To calculate the tax, Ridwan can use the Net Income Calculation Norm (NPPN) with the following formula:

  • Net Income: Gross Income in a year x 50% (DKI Jakarta)
  • Net Income: Rp120,000,000 x 50% = Rp60,000,000
  • Taxable Income (PKP): Net Income-PTKP
  • Taxable Income (PKP): Rp60,000,000 – Rp54,000,000 (PTKPT (Non-Taxable Personal Income) = Rp6 million
  • PPh 21 (Tax Income) that must be paid in a year: 5% x Rp6 million = Rp300 thousand.
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