Constitutional Court Rejects Severance Tax Lawsuit, Rules Remain

Indonesia's Constitutional Court rejected on 2 November 2025 a material test request filed by two private workers concerning tax on severance pay, pension, THT and JHT. The petition, submitted in Jakarta, was declared inadmissible.

The applicants, Rosul Siregar and Maksum Harahap, challenged Article 4 paragraph (1) of the Income Tax Law and Article 17 of the Tax Harmonization Law, arguing that progressive tax rates would significantly reduce severance and pension benefits. The Court found the suit inconsistent because it cited Article 17 without specifying the legal basis and relied on the outdated Ministerial Regulation (PMK) 2/2021 instead of the current PMK 7/2025.

As a result, the tax provisions on severance, pension, THT and JHT remain in force and the government is not required to amend the policy. The ruling reinforces Finance Minister Purbaya Yudhi Sadewa's confidence that the state will not lose tax-related lawsuits, meaning taxpayers will continue to be subject to the existing rates.