BASIC CONCEPT OF INCOME TAX

1. Definition of Income Tax

Income Tax is a tax imposed on income received by the taxpayer.

2. Definition of Tax Subject

The tax subject is the person intended by law to be introduced to tax.
Included in the domestic tax subject are:
a. Private person.
1) Indonesian (without limitation of residence / domicile).
2) Have income.
3) Individual entrepreneurs / companies.
4) Employees.
5) Professional / expert.
b. Un divided inheritance.
1) Is a unit, replacing the rightful (heirs).
2) Still have to pay taxes even though inheritance has not been shared with those who are entitled.
c. Body subject.
1) A group of people from or a collection of capital as a whole either doing business or not doing
business.
2) PT, CV, Firm, Cooperative, Pension Fund, Association of Foundations, Mass Organizations, Social
and Political Organizations, Institutions, etc.
d. Permanent form of business.
1) Form of business used by foreign tax subjects who run a business or conduct activities in Indonesia.
2) In the form of management activities, company branches, representative offices, office buildings,
factories, workshops, warehouses, spaces for promotion / sales, mining, drilling, agriculture,
construction projects, service provision, people or entities acting as agents whose position is not free,
insurance agents or employees, computers for e-commerce.
Included in the foreign tax subject are:
a. An individual who does not reside / reside in Indonesia not more than 183 days in a period of 12
months and an entity that is not established / domiciled in Indonesia.
b. Who runs a business / conducts activities through a permanent establishment in Indonesia.
c. Who can receive / earn income from Indonesia not from running a business or carrying out
activities through a permanent establishment in Indonesia.

3. Domestic Subjective Tax Liability START

a. When a Personal Person is born, is or intends to reside in Indonesia.
b. When the body is established or domiciled in Indonesia.
c. At the time of the emergence of an undivided inheritance.

4. Domestic Subjective Tax Obligations END

a. When the individual dies or leaves Indonesia for ever.
b. When the body is dissolved or no longer domiciled in Indonesia.
c. When the inheritance has been distributed.

5. Not Including Tax Subjects

a. Foreign country representative body.
b. Diplomatic, and consular representative officials or other officials from foreign countries and
persons seconded to those who work and live with them.
c. International Organizations established by Decree of the Minister of Finance.
d. Officials representing international organizations established by Decree of the Minister of Finance.

6. Definition of Income Tax Objects

The object of income tax is any additional economic ability that is received or obtained by the
Taxpayer, both from Indonesia and from outside Indonesia, which can be used for consumption or to
increase the Taxpayer's wealth in the name and in any form.
Excluding tax objects
Based on Law No. 36 of 2008 concerning Income Tax, which does not include tax objects according to
article 4 paragraph 3, among others:
1. Assistance or donations including zakat received by the amil zakat body or charity charity institution
which is formed or authorized by the government and the recipients of the zakat that are entitled and
the hybrid property received by the blood family in a straight lineage one degree and by the religious
body or educational body or a social entity or small businessman including cooperatives established
by the Minister of Finance, as long as there is no relationship with business, work, ownership, or
control between the parties concerned;
2. Inheritance;
3. Assets including cash deposits received by the agency in lieu of shares or as a substitute for equity
participation;
4. Substitution or compensation in respect of work or services received or in the form of nature and /
or enjoyment of a Taxpayer or government;
5. Payments from insurance companies to individuals related to health insurance, accident insurance,
life insurance, dual-purpose insurance, and scholarship insurance:
6. Individuals or parts of profits received or obtained by limited liability companies as domestic
taxpayers, cooperatives, BUM or BUMD from capital participation in a business entity established and
domiciled in Indonesia, with the following conditions:
- Individuals derived from retained earnings; and
- For limited liability companies, BUMN and BUMD that receive dividends, share ownership in the
entity that provides dividends is at least 25% (twenty-five percent) of the total paid-in capital and
must have an active business outside of the ownership of the shares. If the dividend received is
greater than 25% (twenty five percent), then it is not included in the tax object.
1. Fees received or obtained by pension funds whose establishment has been approved by the
Minister of Finance, both those paid by employers and employees;
2. Income from capital invested by pension funds in certain fields determined by the Minister of
Finance Decree;
3. The share of profits received or obtained by members of a limited partnership whose capital is not
divided into shares, alliances, associations, firms, and partners;
4. Bond interest received or obtained by a mutual company and for the first 5 (five) years since the
establishment of the company or the granting of a business license;
5. Income received or obtained by venture capital companies.

7. Tax Objects Received Final Income Tax

Based on Law No. 36 of 2008 concerning Income Tax, objects subject to final tax according to article 4
paragraph 2 include:
a. Deposit rates and other savings.
b. Income from stock transactions and other securities on the stock exchange.
c. Income from the transfer of assets in the form of land and or buildings.
d. Other certain income, the tax imposition is regulated by Government Regulation.

8. Basic Tax Imposition

Basis of Tax Imposition is the value in the form of money which is used as the basis for calculating the
tax owed. For domestic taxpayers and permanent establishments which are the basis of the tax
imposition is taxable income. While for foreign taxpayers is Gross Income.
The amount of the DPP includes:
a. Corporate Taxpayer = Net Income
b. Prbadi Taxpayer = Net Income - PTKP
How to Calculate Taxable Income
a. Using Bookkeeping
1) Taxable Income (Personal Taxpayer):
= Net Income - PTKP
= (Net Income - Costs allowed by the Income Tax Act) - PTKP
2) Taxable Income (Obligatory Agency):
= Net income
= Net Income - Costs that are allowed by the Income Tax Act
b. Using Norms for Calculating Net Income
c. Taxpayers may use Norms for Calculating Net Income
is an Individual Taxpayer who meets the following conditions:
1) Gross circulation is less than Rp. 4,800,000,000.00 per year.
2) Submitting an application within the first three months of the financial year.
3) Organizing records.

9. PTKP (Non-Taxable Income)

In calculating the taxable income of a domestic person, he is given a reduction in the form of non-
taxable income. The amount of PTKP is set as follows:

No. Information for a year

1. Personal Taxpayer's Self Rp. 36,000,000.00
2. Additional taxpayers who marry Rp. 3,000,000.00
3. Additional for a wife whose income is combined with husband's income. Rp. 36,000,000.00
4. Additional for each blood-blooded descendant member in a straight lineage and a fully adopted
adopted child, a maximum of 3 people for each family. Rp. 3,000,000.00

10. Taxable Income

Taxable Income is the basis used to calculate the amount of tax payable which is based on the
company's financial statements after a fiscal correction is carried out in order to obtain net fiscal
income. Whereas for personal taxpayers to find out taxable income must be reduced between net
income and PTKP.
Information:
The tariff used can follow:
a. General Tariff
Tariff based on Article 17 of Law No. 0. 36 of 2008.
b. Special Rates
Tariffs are based on government regulations for certain income.

11. Income Tax Rates

a. For Individual Taxpayers in the country:
Tax Rate of Taxable Income Tax
Up to IDR 50,000,000.00 5%
Above IDR 50,000,000.00 up to IDR 250,000,000.00 15%
Above IDR 250,000,000.00 up to IDR 500,000,000.00 25%
Above IDR 500,000,000.00 30%
10% Dividend Rate
Do not have a NPWP (for Article 21 PPh) 20% higher than it should be
Do not have a NPWP to collect / deduct (for Article 23 Income Tax) 100% higher than it should be
Fiscal payments for those who have a Free NPWP.
b. Domestic Corporate Taxpayers and Permanent Establishments
Year of Tax Rate
In 2009 28%
From 2010 and then 25%
PT, whose 40% shares are traded on the stock exchange 5% lower than they should
Gross circulation up to Rp 50,000,000,000.00 Reduction of 50% of what should be

12. Income Merger / Separation

1. Merging Income
Income or loss for a woman who has been married at the beginning of the tax year or at the beginning
of the portion of the tax year is considered as her husband's income or loss, and is taxed as a whole.
The merger is not carried out in the event that the wife's income is obtained from work as an
employee who has been taxed by the employer, provided that:
1. The income of the wife is solely obtained from one employer.
2. The wife's income comes from a job that has nothing to do with the business or independent work
of the husband or other family members.
 2. Separation of Income
In the event that the husband and wife have lived separately based on the judge's decision, the
calculation of taxable income and taxation is carried out individually. If the husband and wife hold a
written agreement on property and income or if the wife wishes to exercise her own taxation rights
and obligations, the tax calculation is carried out based on the sum of the husband and wife's net
income and each bear a tax burden proportional to the amount of net income.

Example:
Tax calculation for husband and wife who have written income separation agreements or if the wife
wishes to exercise her own taxation rights and obligations are as follows:
Ramdan entered into a written income separation agreement with his wife. Ramdan earns an income
of Rp 100,000,000.00 and his wife works as an employee with an income of Rp 50,000,000. Besides
being an employee, Ramdan's wife runs a beauty salon business with an income of Rp 10,000,000.00.
The imposition of income tax for husband and wife is calculated based on the amount of income of
Rp. 250,000,000.00
For example, the tax owed on the amount of income is Rp. 27,550,000.00 so for each husband and
wife the tax imposition is calculated as follows:
Suami: IDR 100,000,000.00 x IDR 27,550,000.00 = IDR 11,020,000.00 IDR 250,000,000.00
 Wife: Rp. 150,000,000.00 x Rp. 27,550,000.00 = Rp. 16,530,000.00 Rp. 250,000,000.00
1. Earnings of Young Children
The income of an immature child, regardless of the source of his income and whatever the nature of
his work, is combined with the income of his parents in the same tax year. What is meant by
"immature child" is a child who is not yet 18 years old and has never been married. If a child is not an
adult, whose parents have separated, received or earned income, the tax is combined with the
income of the father or mother based on the actual situation.

13. Special Relationship

Special relationships are deemed absent if:
1. Ownership Relationship (Article 18 of the PPh Jo Law SE-04 / PJ.7 / 1993 Jo SE-18.Pj.53 / 1995)
 Inclusion of direct or indirect capital of 25% or more in other taxpayers.
 The relationship between compulsory applicants and the inclusion of 25% or more in two or more
taxpayers.
 Relations between two taxpayers or more whose capital is 25% or more owned by the same party.
2. Mastery Relations:
 That is the relationship between taxpayers who control other taxpayers, or two taxpayers or more
are under the same control either directly or indirectly, either mastery through management or
through the use of technology.
 Mastery through management for example: Mr. X is the President Director of PT Alfa and also
serves as Director of Security at PT Beta. In this case between PT Alfa and PT Beta there is a special
relationship
 Mastery through the use of technology, for example: PT A companies that produce beverages using
a formula created by PT B. In this case between PT A and PT B there is a special relationship
because there is control through the use of technology by PT B against PT A.
3, Blood Relations or Marriage
 Special relationship because there is a family relationship, both in blood and in a fine in the straight
line and / or sideways one degree.
 Straight degrees one degree are: father, mother and child.
 Sideways one degree, namely: siblings (biological, father or mother).
 The agenda is straight one degree: in-laws with son-in-law or parents with stepchildren.
 Fingers aside one degree: brother-in-law.
 If between husband and wife is made an agreement to separate property in income, then there is a
special relationship between husband and wife.