The shift from offline to online shopping has created numerous new opportunities, including the role of affiliate marketing. In this business model, individuals or groups, known as affiliates, partner with companies or other individuals to promote products or services. Affiliates use various online marketing channels such as websites, blogs, social media, and ads to reach their audience and drive sales.
Affiliate Earnings and Commissions
The earnings generated by affiliates vary depending on the affiliate platform used and the type of products or services promoted. Generally, commissions range from 1% to 10% of the product price per transaction. For example, if an affiliate success sells a product priced at Rp1.000.000,00, the commission earned could be between Rp10.000,00 and Rp100.000,00, depending on the set percentage.
Income Tax for Affiliates
Affiliates who earn commissions need to be aware of their tax obligations. Affiliate income falls under the category of Income Tax Article 21 (PPh 21). The tax rates for PPh 21 are progressive according to Law No. 7 of 2021 concerning Tax Regulation Harmonization. Here are the tax rates based on taxable income:
- Taxable income up to Rp60.000.000,00 per year – 5%
- Taxable income over Rp60.000.000,00 up to Rp250.000.000,00 per year – 15%
- Taxable income over Rp250.000.000,00 up to Rp500.000.000,00 per year – 25%
- Taxable income over Rp500.000.000,00 up to Rp5.000.000.000,00 per year – 30%
- Taxable income over Rp5.000.000.000,00 per year – 35%
Impact of NPWP on Tax Rates
Affiliates without a Tax Identification Number (NPWP) will be subject to a higher tax rate, which is 20% more than the applicable tax rates.
Effective Tax Rate Calculation (TER)
In addition to knowing the tax rates on earned income, affiliates should understand the Effective Tax Rate (TER) calculation scheme. The PPh 21 TER scheme is a simplified method for calculating and withholding PPh 21, designed to make it easier for affiliates to fulfill their tax obligations accurately. According to Government Regulation No. 58 of 2023, the TER calculation scheme is divided into two categories:
- Monthly Effective Rate
a. Category A
– Single with no dependents (TK/0) – Rp54.000.000,00
– Single with one dependent (TK/1) – Rp58.500.000,00
– Married with no dependents (K/0) – Rp58.500.000,00
b. Category B
– Single with two dependents (TK/2) – Rp63.000.000,00
– Single with three dependents (TK/3) – Rp67.500.000,00
– Married with one dependent (K/1) – Rp63.000.000,00
– Married with two dependents (K/2) – Rp67.500.000,00
c. Category C
– Married with three dependents (K/3) – Rp72.000.000,00
The monthly Effective Tax Rate (TER) calculation applies from January to November using the formula: Gross Income x %TER (A/B/C). In December or the last month of the tax year, taxpayers can calculate using: PPh 21 Payable – PPh 21 Already Withheld from January to November.
- Daily Effective Rate
a. Less than or equal to Rp450.000,00 – 0% x Daily Gross Income
b. More than Rp450.000,00 up to Rp2.500.000,00 – 0.5% x Daily Gross Income
Conclusion
Affiliate marketing offers significant earning potential with commissions that can vary based on the sales of promoted products or services. However, it is crucial for affiliates to understand their tax obligations and ensure they have a Tax Identification Number (NPWP) to avoid higher tax rates. With a good understanding of taxation and careful planning, affiliates can manage their income more effectively and maximize their earnings from this profession.
By Tommy HO – Managing Partner TBrights
TBrights is a tax consultant in Indonesia which currently is an integrated business service in Indonesia providing comprehensive tax and business services
Reference:
1. Law of the Republic of Indonesia Number 7 of 2021 on the Harmonization of Tax Regulations
2. Government Regulation of the Republic of Indonesia Number 35 of 2023 on the Rate of Income Tax Withholding Article 21 on Income Related to Employment, Services, or Activities