Types of Tax Objects and Their Exceptions

Various Types of Tax Objects – Taxes are one of the state revenues in the form of money collected from individual and corporate funds and are coercive. Taxes serve as a source of funding for state development. Funds received as tax revenue will go to the state treasury.

There are seven sectors that are a source of state revenue from taxes, namely income tax, sales tax on luxury goods, land and building tax, value added tax, export tax, international trade tax, and import duties and excise. In the seven sources of state taxes, the government determines which forms of revenue are subject to tax. Income subject to tax is also known as tax object.

Check out the following explanation to learn more about taxes, starting from the meaning to various tax objects.

Definition of Tax Objects

Jay K. Rosengard in the book Property Tax Reform in Developing Countries defines a tax object as a tax-payable asset. According to Law (UU) No. 36 of 2008 concerning Income Tax, the object of tax is income, namely any additional economic capacity received or obtained by taxpayers, both originating from Indonesia and from outside Indonesia, which can be used for consumption or to increase the wealth of the taxpayer concerned, with the name and in any form, including:

  1. Reimbursement or compensation in respect of work or services.
    Income that we generally receive while working and with employee or non-employee status such as salary, wages, honorarium, bonuses, allowances, and others is included in this category. The amount subject to tax depends on the amount of income which is further regulated in law.
  2. Prizes obtained from sweepstakes, jobs, activities, and awards.
    If Sinaumed’s had ever watched the draw being conducted on television, he would have remembered the moment the host repeatedly announced that the prizes received by the winners would be taxed. Generally the tax levied from a gift will be borne by the recipient. However, in some cases prize tax is payable by the organizer or giver of the prize.
  3. Operating profit.
    Operating profit is the difference obtained from operating income minus explicit costs.
  4. Profits due to sales or due to the transfer of assets.
    Included in this category are profits derived from share exchange, equity participation, transfer of mining rights, inheritance, etc.
  5. Receipt of tax payment returns.
  6. Flower.
    Included in interest as a tax object are premiums, discounts, as well as rewards obtained from guaranteed debt repayments.
  7. Dividend.
    Dividend is the net profit of a company which is distributed among the shareholders. Dividends that are subject to tax are all dividends in any name or form.
  8. Royalties.
    Royalties are a number of funds paid in return from a person to a party whose patent rights are utilized or used.
  9. Rent.
    Rent is a fee paid as a price for the use of certain property in a certain period of time.
  10. Receipt or acquisition of periodic payments.
  11. Profits due to debt relief.
    The amount of profit from debt relief that is subject to tax is in accordance with the provisions set by the government.
  12. Gains on foreign currency exchange differences;
  13. The difference is more due to revaluation of assets.
  14. Insurance premium.
  15. Contributions received or earned by the association from its members.
    Contribution in question is a taxpayer obtained from running a business or free work.
  16. Additional net worth.
    Additional wealth that is subject to tax comes from income and has not been taxed.
  17. Income from sharia-based businesses.
  18. Interest rewards.
    Interest returns that are counted as tax objects are in accordance with what is meant in the law regarding general provisions and tax procedures.
  19. Indonesian bank surplus.

In short, every change in assets and consumption by individuals or companies is counted as income that is included in the tax object. However, the income approach used in determining the tax object is a transaction. Thus, income recorded in transactions and defined in law is counted as a tax object.

The amounts that are subject to tax from the objects above are not all the same. The amount is determined by the state or the government as the organizer of the tax. Everything is regulated in related laws that deal with taxation matters.

Apart from those mentioned above, Law no. 36 of 2008 also regulates the final tax object. The final tax object is a tax object that is subject to a rate after one year. The tax objects are:

  1. Income in the form of interest on deposits and other savings. This category of income can be in the form of interest on bonds and government bonds as well as interest on deposits.
  2. Income in the form of raffle prizes.
  3. Income from transactions in stocks and other securities. Basically, several investment instruments traded on the money market and capital market are subject to final tax.
  4. Income from transfer of assets transactions. The element of assets referred to can be in the form of property such as renting and selling land or buildings, construction service businesses, and real estate businesses.
  5. Other specified income.
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Regulations Regulating Tax Objects

Tax objects are regulated in regulations and laws governing tax affairs, including:

  1. UU no. 28 of 2007 concerning General Provisions and Tax Procedures
  2. UU no. 36 of 2008 concerning Income Tax
  3. Regulation of the Director General of Taxes No. PER-16/PJ/2016 concerning Technical Guidelines for Income Tax Withholding, Deposit and Reporting Procedures
  4. Law Number 12 of 1994 concerning Land and Building Taxes
  5. Law Number 18 of 2000 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods
  6. PP Number 49 of 2021 concerning Tax Treatment of Transactions Involving Investment Management Agencies and/or Entities They Own

Income Tax Object

The object of income tax is any money earned by a person as a result of carrying out economic activities that is payable as a taxpayer. The economic activity in question can be valid in the past or still ongoing. Referring to the Regulation of the Director General of Taxes No PER-16/PJ/2016 article 21, which are included in the object of income tax are:

  1. Income received or earned by permanent employees. This employee’s income consists of regular and irregular income such as salary, overtime pay, benefits, bonuses.
  2. Income received or earned by pension fund recipients. This income is received by someone who is no longer working in a company due to entering retirement age. The tax object is in the form of pension money or similar income that is obtained regularly.
  3. Income in the form of severance pay. Income in this category is also received by people who are no longer working for certain reasons such as retirement or being laid off. The tax object is in the form of pension benefit money, old age allowance, or old age security which is paid all at once, the payment of which is over a period of 2 years from the time the employee stops working.

Objects of Value Added Tax on Goods and Services and Sales of Luxury Goods

The taxes imposed on goods and services as well as the sale of luxury goods are quite different from the tax objects previously described. The type of tax levied is not included in the income tax object but is a value added tax object. The following is included in the object of value added tax on goods and services and the sale of luxury goods contained in Law Number 18 of 2000.

Goods and Services Value Added Tax Objects

  1. Delivery of taxable goods in the customs area carried out by entrepreneurs.
  2. Import of taxable goods.
  3. Submission of taxable services in the customs area carried out by entrepreneurs.
  4. Utilization of intangible taxable goods from outside the customs area within the customs area.
  5. Utilization of taxable services from outside the customs area within the customs area.
  6. Export of taxable goods by taxable entrepreneurs.

Object of Value Added Tax on Sales of Luxury Goods

  1. Delivery of luxury taxable goods. This delivery is carried out by entrepreneurs producing taxable goods that are classified as luxury goods in the customs area in their business activities or work
  2. Import of taxable goods classified as luxury.

Land and Building Tax Objects

Referring to Law no. 12 of 1994, the earth is defined as the surface of the earth and the body of the earth in the interior and sea. The boundaries in this definition are all land and water in the Indonesian territory or zone. While the definition of a building is a technical construction that is planted or attached permanently. The intended buildings are not only those on the ground, but also in the waters. Thus, any income derived from the transfer of land and/or building rights in the territory of Indonesia is included in the object of land and building tax.

Even so, there are several exceptions to land or buildings from tax objects, namely:

  • Used for public purposes, such as worship, social, health, education;
  • Used as a grave or included in a historical site;
  • Included in conservation lands such as protected forests, national parks;
  • Used by diplomatic missions, consulates; And
  • Used by agencies or representatives of international organizations.

Tax Objects Involving Investment Management Institutions

Various kinds of investment instruments, both those traded on the money market and the capital market, are not exempt from taxation. Even some investments are subject to final tax. The following is an income tax object involving the Investment Management Agency (LPI).

  1. Interest from loans to entities owned by LPI or joint venture companies.
  2. Dividends derived from repayments due to liquidation exceed the amount of capital. However, dividends are tax-free if used to support business needs within the Republic of Indonesia within a period of 3 years from liquidation.
  3. LPI business and asset development results.
  4. Profits due to sales or due to the transfer of assets.
  5. Grant.
  6. Income related to placement of funds in financial instruments.
  7. Income from administering or managing assets.
  8. Income from other legal sources in accordance with regulatory provisions.
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Foreign Elements in Tax Objects

Launching from the book Introduction to Taxation by Tony Marsyahrul, there are foreign elements that can be either tax objects or tax subjects in international tax law. Foreign elements in the form of tax objects include:

  1. Tax objects that are abroad or outside the territory of Indonesia but are owned by domestic tax subjects.
  2. Tax objects that are domestic but owned by foreign tax subjects.

Tax object exceptions

Article 4 Paragraph (3) of the Income Tax Law regulates objects that are exempt from the imposition of income tax. Those objects are:

  1. Assistance or donations, including zakat received by zakat amil bodies and zakat recipients who are entitled to certain conditions. The condition that must be met for donations or assistance to be free from tax is the legalization of the formation of amil zakat bodies or religious institutions as recipients by the government. Zakat recipients who are not amil bodies must also meet certain conditions such as being entitled to receive.
  2. Gifted assets that are free from taxation must be received by blood relatives in a straight line of one degree. Institutions that are exempt from gift tax are religious bodies or educational bodies or social organizations or small entrepreneurs including cooperatives determined by the Minister of Finance.
  3. Inheritance.
  4. Cash deposit as a substitute for shares or as a substitute for equity participation received by the agency.
  5. Reimbursement or compensation in connection with work or services received. Reimbursement that is excluded in this category is in the form of in-kind and/or benefits from the taxpayer or the government.
  6. Certain insurance payments.
    Insurance payments that are not subject to tax are health insurance, accident insurance, life insurance, endowment insurance and scholarship insurance.
  7. Contributions received or obtained by pension funds.
  8. Certain income pension fund.
  9. Share of profits received or earned by members of limited liability companies, associations, associations, firms and partnerships.
  10. Bond interest earned by the mutual fund company during the first five years.
  11. Certain income venture capital firms.
  12. Scholarship.
  13. Dividends between companies in Indonesia with certain conditions.
    The conditions that must be met so that dividends in Indonesia are tax-free are:
    a.) Derived from retained earnings reserves.
    b.) Ownership of tax subject shares in a dividend-giving agency of at least 25% of the total paid-up capital.
    c.) There is an active business owned by the recipient of the dividend other than the share ownership.
    d.) Dividends received or earned by limited liability companies are domestic taxpayers, cooperatives, and BUMN/BUMD.
  14. Assistance or compensation provided by the Social Security Administration Agency (BPJS). Before being given, this assistance or compensation is handed over to certain taxpayers who are entitled.
  15. The excess will be received by agencies engaged in research and development. The conditions that must be met by research institutions so that the remaining funds are tax-free:
    • Non-profit bodies or institutions in the field of education and/or research and development, which have been registered with the agency according to their field.
    • The remaining excess funds must be invested or invested in facilities and infrastructure for activities related to education, research and development.
    • Spending the remaining funds is carried out within a maximum period of 4 years from the receipt of the remaining funds.

Conclusion

When entering a productive age and starting to work as an employee or employee, it’s good for Sinaumed’s to understand the ins and outs of taxation. Because, part of the income that Sinaumed’s has will be taxed. Not only income, other forms of assets or assets that we have can also be taxed or tax-free.

As good citizens and supporting the country’s development, we need to be obedient in paying taxes. To understand what constitutes a tax object, Sinaumed’s can read books on taxation which can be accessed via www.sinaumedia.com.

source : jenis-jenis pajak di indonesia