The Directorate General of Taxes (DGT) on 16 March 2023 issued regulation No. PER-1/PJ/2023 of technical
guidance on withholding tax on royalty received by individual taxpayers who adopt net income calculation norm.

Following are few key highlights.

1. Withholding Tax on Royalty

• Royalty paid, provided, or due to resident taxpayers or permanent establishments is subject to withholding tax article 23.
• Withholding tax rate for royalty is 15% of the “gross amount”.

2. Net income calculation norm for individual tax residents

• For individual tax residents who adopt net income calculation norm, the “gross amount” is set at 40% of the royalty. Therefore, net withholding tax of royalty to the said individual taxpayers is 6%.
• The individual taxpayers must provide the receipt of notification net income calculation norm to the withholder prior to payment.

3. Remittance and reporting of withholding tax

• The withholder must remit withholding tax to the government and report the withholding tax in the monthly unified tax return.
• The withholder is responsible to provide withholding tax slip to the individual taxpayers.

4. Tax Filing for Individual tax residents who earn royalty

• Royalty must be reported by individual taxpayers in Annual Income Tax Return, and withholding tax pertaining to the royalty can be credited in the Annual Income Tax Return.