INCOME on construction services is one of the objects subject to final income tax (PPh). The final income tax scheme for construction service businesses has different rates based on the type of service and the status of ownership of the certificate.
Provisions related to final income tax on construction service businesses are mainly regulated in Article 4 paragraph (2) letter d of Law no. 36 of 2008 concerning Income Tax stdtd Law no. 7 of 2021 concerning Harmonization of Tax Regulations ( PPh Law stdtd UU HPP ).
Furthermore, the provisions regarding tariffs, tax bases (DPP), and the party making the withholding of income tax are regulated in PP 51/2008 stdtd PP 9/2022 .
Based on Article 1 paragraph (2) of PP 9/2022, construction services are construction consulting services and/or construction works. The construction service business can be carried out through construction consulting services, construction works, and integrated construction works.
It should be noted that construction consulting services cover the whole or part of activities that include assessment, planning, design, supervision, and management of the construction of a building.
Meanwhile, work services include activities that include the construction, operation, maintenance, demolition, and rebuilding of a building.
Furthermore, integrated construction work services include a combination of construction work and construction consulting services, including the integration of service functions in the planning, procurement, and development integration model as well as the planning and development integration model.
The three services from the construction service business are subject to final income tax at different rates. The details related to the final PPh rates imposed on each type of service from the construction service business.
Final PPh on construction services business can be calculated by multiplying the rate and the tax base (DPP). Referring to Article 5 paragraph (2) of PP 9/2022, the amount of DPP on income from construction services business is the amount of payment or receipt of payment, excluding value-added tax (VAT).
The amount of payment or receipt of payment is part of the value of the construction service contract. For information, the value of the construction service contract can be understood as the value listed or should be included in the construction service contract as a whole.
Furthermore, Article 5 paragraph (1) and Article 6 of PP 51/2008 stdtd PP 9/2022 regulate the aspect of withholding income tax. Based on these provisions, there are 4 conditions in determining the party that makes the withholding or deposit of income tax.
First, income tax is deducted by service users who are tax withholders at the time of payment. Second, if the service user is not a tax withholding agent, the income tax is paid by the service provider himself.
Third, there is a difference in underpayment due to the amount of PPh based on the value of the construction service contract being higher than the PPh that has been paid. In this situation, the difference in income tax is paid by the service provider himself.
Fourth, the value of the construction service contract is not fully paid by the service user. In this condition, the income tax on the unpaid value does not need to be deposited or deducted as long as the service provider records it as uncollectible receivables.