Definition of Tax Objects
The object of tax is income or additional economic capability received by the taxpayer. In simple terms, the object of tax is income that is subject to tax. The meaning of own income is any additional economic capacity received or obtained by a taxpayer, both from Indonesia and from outside Indonesia, which can be used for consumption or to increase the wealth of the taxpayer in question in whatever name and form. The income comes from Indonesia.
Tax objects are used for consumption or to increase the wealth of the taxpayer concerned. In the form of any name or form, income or additional economic capabilities received by the taxpayer. The income comes from Indonesia and outside Indonesia. If these types of income are included in the types of tax object categories and criteria, they will be subject to tax objects according to the applicable rates and types of taxes.
Kinds of Tax Objects
The following includes tax objects, namely:
The meaning of compensation in other forms includes compensation in kind provided by non-income tax subjects. Compensation or reimbursement in respect of work or services obtained or received includes salaries, wages, benefits, honoraria, commissions, bonuses, gratuities, pensions or other forms of compensation.
Prizes obtained from sweepstakes or jobs or activities or awards. What is meant by award is compensation given in connection with certain activities, for example compensation received in connection with the discovery of ancient objects.
3. Operating profit
Operating profit is profit from operating results. There is another opinion about operating profit which is the company’s income minus explicit costs or company accounting costs. Operating profit differs from economic profit in that the company’s revenue is reduced by explicit costs and implicit costs.
Profit levels usually differ between companies in the same industry and the differences are greater in different industries. The following are several theories trying to explain these differences, namely:
- Profit theory in the face of risk.
According to this theory, above normal economic profit results are needed by companies to enter and survive in several fields such as oil exploration which have above average risks.
- The theory of profit due to friction.
This theory states that some companies due to factors (economies of scale, capital requirements or patent rights) can act as monopolists which allows them to maintain above normal profits for the long term.
- Innovation profit theory.
In this innovation theory, profits above normal are compensation for successful innovations.
- Managerial efficiency profit theory.
The theory of managerial efficiency profit is profit that can achieve profits above normal if it succeeds in carrying out efficiency in various fields and can fulfill the desires of its consumers.
Gains arise from selling or transferring assets, including:
- Gains due to transfer of assets to corporations, partnerships and other entities as a substitute for shares or equity participation.
- Profits due to the transfer of assets to shareholders, partners or members obtained by the company, in partnerships and other entities.
- Gains due to liquidation, merger, consolidation, expansion, division, business takeover or reorganization under any name.
- Profits due to the transfer of assets in the form of grants, assistance or donations except those given to blood relatives in one degree of direct lineage and religious bodies, educational bodies, social organizations including foundations, cooperatives or individuals who run micro and small businesses.
The provisions are further regulated by a Minister of Finance Regulation, as long as there is no relationship with business, work, ownership or control between the parties concerned.
- Profits from the sale or transfer of part or all of mining rights, a sign of participation in financing or capital in mining companies.
5. Acceptance of tax payments
Receipt of tax payments that have been charged as expenses and additional tax refund payments.
Interest which includes premiums, discounts and compensation due to guaranteed debt repayments, namely:
- Premium occurs when bonds are sold above their nominal value. While the discount occurs when bonds are purchased below their nominal value.
- The premium is income for those who issue bonds, while the discount is income for those who buy bonds.
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Dividends in any name or form, including dividends from insurance companies to policyholders and distribution of profits from cooperative operations. Dividends in any name or form, consisting of:
- Distribution of profits either directly or indirectly in any name or form.
- Repayment due to liquidation exceeds the amount of paid-up capital.
- The distribution of bonus shares without deposit includes bonus shares from shares of premium share capitalization, except if the nominal value of the shares held after the distribution of the bonus shares does not exceed the amount of paid up capital.
- Distribution of profits in the form of shares (stock dividends).
- Recording of additional capital without deposit except for those originating from the capitalization of excess revaluation of fixed assets.
- The amount that exceeds the amount of the paid-up shares received or obtained by the shareholders due to the buyback of shares by the company concerned.
- Repayment of all or part of paid-up capital, if in past years a profit was obtained, except if the repayment was due to legal reduction of capital (statutory).
- Payments in respect of tokens including those received as redemption of tokens of profit.
- Share of profit in respect of bond holdings.
- Share of profit received by policyholders.
- Distribution of the remaining results of operations to cooperative members.
- Company expenses for the personal needs of shareholders which are charged as company expenses.
Royalties or returns for the use of rights. Royalties are an amount paid or payable in any way or calculation whether done periodically or not. For example patents, copyrights or natural resources. For example, creators get paid royalties when their work is produced and sold. Authors can earn royalties when their books are sold. Landowners leasing their land to oil companies or mining companies will receive royalties based on the amount of oil produced from the land.
According to Article 4 of Law No. 36 of 2000 concerning Income Tax, what is included in the use of copyrights and patents are as follows:
- Use or the right to use copyright in the field of literature, art or scientific work, patents, designs or models, plans, secret formulas or processes, trademarks or forms of intellectual property rights / industrial or other similar rights.
- The use of or the right to use industrial, commercial or scientific equipment or supplies.
- Provision of knowledge or information in scientific, engineering, industrial or commercial fields.
- Provision of additional assistance or equipment in connection with the use or right to use said rights in number 1, the use or right to use said equipment or equipment in number 2 or the provision of knowledge or information mentioned in number 3, in the form of:
- First, acceptance or the right to receive recorded images or sound recordings or both which are distributed to the public via satellite, cable, fiber optic or similar technology.
- Second, the use or right to use recorded images or sound recordings or both for television/radio recordings that are broadcast/transmitted via satellite, cable, fiber optic or similar technology.
- Third, the use or right to use part or all of the radio communication spectrum.
- The use or right to use motion picture films, films or video tapes for television broadcasts or video tapes for radio broadcasts.
- Relinquishment of all or part of the rights relating to the use or granting of intellectual/industrial property rights or other rights as mentioned above.
Rent or income with the use of property. The definition of rent includes compensation received or earned in any name and in any form in connection with the use of movable or immovable property, for example car rental, office rent, house rent, warehouse rent and others.
10. Periodic payments
Receipt of obtaining periodic payments, for example elementation or lifetime allowances that are paid repeatedly within a certain period of time.
Benefits derived from debt relief, unless it has reached a certain amount stipulated by government regulations.
12. Foreign currency
Benefits can also be obtained from the difference in exchange rates in foreign currencies.
The difference is also more due to the revaluation of assets.
14. Insurance premiums
The insurance premium is an amount of money that must be paid by every customer who is registered with the insurance company as a guarantor. The amount of money that must be paid each month has been determined by the insurance company by taking into account the condition of the customer.
Contributions that are also received or obtained from associations of its members consisting of taxpayers who run businesses or work independently.
Additional net assets derived from income that has not been taxed.
17. Sharia business
Income derived from the existence of a sharia-based business.
18. Interest rewards
Interest compensation referred to in the law governing general provisions and tax procedures.
19. Bank Indonesia surplus
Bank Indonesia’s surplus is the difference between Bank Indonesia’s receipts and expenditures. In the context of taxation, the treatment of Bank Indonesia’s surplus (profit) underwent significant changes. These changes relate to the function and position of Bank Indonesia as an institution.
Matters outside the tax object
There are also those that are exempt from tax objects, namely:
1. Help or donation
This includes zakat received by Amil Zakat bodies or Amil Zakat institutions established or authorized by the government and received by eligible zakat recipients or religious donations which are mandatory for adherents of religions recognized in Indonesia. Those received by religious institutions formed or authorized by the government and those received by the rightful recipients of donations.
The provisions are regulated by or based on government regulations as long as there is no relationship with business, work, ownership or control between the parties concerned.
2. Grant assets
Gifts received by blood relatives in a straight line of one degree, religious bodies, educational institutions, social agencies.
Including foundations, cooperatives, or individuals who run micro and small businesses, the provisions of which are regulated based on a decision of the Minister of Finance as long as there is no relationship with the business, ownership, work or control between the parties concerned.
Inheritance is a legacy left by the heir to the heir. Inheritance according to language means the transfer of something from one person to another or from one people to another. Heirs are people who die, both men and women who leave a number of possessions.
Heirs are people who are entitled to receive inheritance both in terms of family relations, marriage and for freeing slaves. As for the basis for the right to inherit or the basis for obtaining a share of inheritance according to the Qur’an are:
- There is a blood relationship, this is clearly determined by the Qur’an in QS Annisa verses 7, 11, 12, 33, and 176.
- Marriage relationship
Marriage relationship also determines the basis for dividing or obtaining inheritance.
- Brotherly relations due to religion determined by the Qur’an are not more than a third of the heir’s property (QS. Al Ahzab: 6).
- Relative relations due to fellow emigration at the beginning of the development of Islam, even though there is no blood relationship (QS. Al Anfal 75). There are various kinds of inheritance of knowledge, for example obligatory prayer (fardhu), zakat, pilgrimage.
- Cash Assets
including cash deposits are received by state-owned enterprises as well as regionally owned and privately owned enterprises.
- Compensation Compensation
or compensation in connection with work or services received or obtained in kind or favors from the taxpayer or the government.
Except those provided by non-taxpayers. Taxpayers who are subject to final tax or taxpayers who use special calculation norms (deemed profit).
- Payments from insurance companies to individuals such as life insurance, health insurance, accident insurance, endowment insurance and scholarship insurance.
- Dividends or profit shares received or earned by limited liability companies as domestic taxpayers, cooperatives, state-owned enterprises, regionally-owned enterprises, from equity participation in business entities that are established and domiciled in Indonesia provided that the dividends come from reserves of retained earnings .
- For limited liability companies, state-owned companies and regional-owned companies that receive dividends, share ownership in the company that pays dividends is at least 25% of the total paid-up capital.
- Contributions received or obtained from pension funds that have been approved by the Minister of Finance, whether paid by employers or employees.
- Income from capital generated by pension funds as referred to in the previous number in certain fields stipulated by the Minister of Finance.
- The share of profits obtained from members of limited liability companies whose capital is not divided into shares, partnerships, associations, firms and partnerships including unit holders of collective investment contract participation.
- Income received or earned by a venture capital company is in the form of a share of profits from a business partner entity that is established and runs a business or activity in Indonesia.
- Provided that the partner business entity is a micro, small, medium business entity or one that carries out activities in the business sectors regulated based on the Minister of Finance regulations, with its shares not traded on the stock exchange in Indonesia.
- Scholarships are based on certain requirements, the conditions of which are regulated by the Minister of Finance.
- The remainder is received or earned by a moving non-profit organization or institution engaged in education and/or research and development that has been registered with the agency in charge.
Reinvested in the form of facilities and infrastructure for education and/or research and development activities within a maximum period of 4 years since the remainder is obtained, the provisions of which are further regulated by or based on Ministry of Finance Regulations.
- Assistance or compensation paid by Social Security Administrative bodies to certain taxpayers, which have been further regulated based on Ministry of Finance Regulations.
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