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Doctor tax updates: A hardship or a hidden gain?
Doctors and the government can both take active steps in navigating the new tax system, including improving their tax literacy, so they can better manage their personal finances and focus on delivering quality patient care.
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A doctor checks a pediatric dengue fever patient on March 8, 2024, at the Sunan Kudus Islamic Hospital in Kudus, Central Java. (Antara/Yusuf Nugroho)
M
any doctors recently voiced a concern that their tax burdens felt heavier than before. Some even speculated that the Taxation Directorate General was imposing higher taxes on their profession, assuming that doctors belonged to the high-income bracket. But is this really the case?
The actual tax rate remains unchanged, but the way hospitals deduct it in their role as withholding agents has shifted. With lower upfront deductions, doctors now face a larger final payment at the end of a fiscal year.
This change in mechanism is driven by Finance Minister Regulation No. 168/2023, which replaced regulation No. 252/2008, and affects not only doctors. Other professionals, including lawyers, researchers and influencers, have also had to adjust to this new system.
Previously, tax calculations considered both 50 percent of gross income and its accumulated total throughout the year. As the latter amount grew, it pushed these professionals’ incomes into a higher tax bracket and thus, to progressively larger deductions.
For example, an unmarried doctor earning Rp 60 million (US$3,600) per month is taxed 50 percent of their income, or Rp 30 million. Their hospital’s monthly deductions might have been Rp 1.5 million early in the fiscal year but could increase to Rp 7.5 million later to total Rp 59 million annually.
Under the new mechanism, tax is still based on 50 percent of gross income but is assessed independently each month. This means the above doctor is taxed 50 percent at Rp 30 million per month and their earnings remain in the first bracket for monthly deductions of Rp 1.5 million, amounting to Rp 18 million for the whole year. However, the progressive tax, which considers accumulated income, also applies at the end of the fiscal year when filing their tax returns.
For a taxable income of Rp 306 million, the final tax bill would be Rp 45.5 million. Under the old system, doctors could be refunded Rp 13.5 million after submitting their tax returns because their advance payments totaled Rp 59 million. Now, with only Rp 18 million paid upfront, they would owe Rp 27.5 million.
