Types of Tax Objects and Their Exceptions

Types of Tax Objects and Their Exceptions

Nikereact.org – Tax is one of the state revenues in the form of money collected from individual and company funds and is coercive. Taxes function as a source of funding for state development. Funds received as tax revenue will go to the state treasury.

There are seven sectors that become sources of state income 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 what forms of income are taxed. The income that is subject to tax is also known as the object of the tax.

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

Definition of Tax Object

Types of Tax Objects and Their Exceptions

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

  1. Reimbursement or compensation in respect of work or services.
    The income that we generally receive when we work and have the status of employees and non-employees such as salaries, wages, honorariums, bonuses, allowances, and others are included in this category. The amount subject to tax depends on the amount of income which is further regulated in the law.
  2. Prizes obtained from sweepstakes, work, activities, and awards.
  3. If has ever watched a draw conducted on television, will remember the moment when the presenters repeatedly announced that the prizes received by the winners would be taxed. Generally, the tax levied on a gift will be borne by the recipient. However, in some cases the gift tax is paid by the organizer or gift giver.
  4. Operating profit.
  5. Operating profit is the difference obtained from operating income minus explicit costs.
  6. Gain due to sale or due to transfer of property.
  7. Included in this category are profits derived from share turnover, equity participation, transfer of mining rights, inheritance, etc.
  8. Receipt of tax payments.
  9. Flower.
  10. Included in interest as a tax object are premiums, discounts, and benefits obtained from debt repayment guarantees.
  11. Dividend.
  12. Dividend is the net profit of a company which is distributed to shareholders. Dividends subject to tax are all dividends in any name and form.
  13. Royalties.
  14. Royalty is a sum of money paid as a reward from a person to a party whose patent rights are used or used.
    Rent.
  15. Rent is a fee that is paid as a price for the use of certain assets within a certain period of time.
    Receiving or obtaining periodic payments.
  16. Profits due to debt relief.
  17. The amount of profit from debt relief is subject to tax in accordance with the provisions regulated by the government.
  18. Foreign exchange gains;
    The difference is due to the revaluation of assets.
    Insurance premium.
    Contributions received or obtained by the association from its members.
    The contribution in question is a taxpayer obtained from running a business or independent work.
    Additional net worth.
    Additional wealth subject to tax comes from income and has not been taxed.
    Income from sharia-based business.
  19. Interest rewards.
    Interest that is calculated as a tax object in accordance with the law regarding general provisions and taxation procedures.
    Indonesian bank surplus.

In short, every change in property and consumption made 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, the income recorded in the transaction and defined in the law is counted as a tax object.

The amounts that are taxed on the above objects are not all the same. The amount is determined by the state or the government as the tax administrator. Everything is regulated in the relevant laws that deal with tax matters.

In addition to those mentioned above, Law no. 36 of 2008 also regulates the final tax object. Final tax objects are tax objects that are subject to tariffs after one year. The objects of the tax are:

  1. Income in the form of interest on deposits and other savings. Income in this category 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 stock and other securities transactions. Basically, some investment instruments traded on the money market and capital market are subject to final tax.
  4. Income from property transfer transactions. The assets element referred to can be in the form of property such as renting and selling land or buildings, construction services business, and real estate business.
  5. Other certain income.
    Regulations Regulating Tax Objects

Regulations Regulating Tax Objects

Tax objects are regulated in the 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. Director General of Taxes Regulation No. PER-16/PJ/2016 concerning Technical Guidelines for Withholding, Depositing, and Reporting Income Tax
  4. Law Number 12 of 1994 concerning Land and Building Tax
  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 Institutions and/or Entities Owned

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 owed as a taxpayer. The economic activities in question can be those that have occurred in the past or are still ongoing. Referring to the Regulation of the Director General of Taxes No. PER-16/PJ/2016 article 21, the objects of income tax are:

  1. Income received or earned by permanent employees. This employee’s income consists of regular or irregular income such as salary, overtime pay, allowances, bonuses.
  2. Income received or earned by the recipient of the pension fund. This income is received by someone who is no longer working in a company due to entering retirement age. The object of the tax is in the form of pension or similar income which 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 object of the tax is in the form of pension benefits, old-age benefits, or old-age benefits which are 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 and the sale of luxury goods are quite different from the tax objects described previously. The type of tax imposed is not included in the object of income tax but the object of value added tax. The following are included in the object of the value added tax of goods and services and the sale of luxury goods as contained in Law Number 18 of 2000.

Objects of Value Added Tax on Goods and Services

  1. Delivery of taxable goods within the customs area carried out by entrepreneurs.
  2. Import of taxable goods.
  3. Delivery of taxable services within 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.

Luxury Goods Sales Value Added Tax Object

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

Land and Building Tax Object

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

Even so, there are some exceptions for land or buildings from the tax object, 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 representatives, consulates; and
  • Used by bodies or representatives of international organizations.

Tax Objects Involving Investment Management Agencies

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

  1. Interest from loans to entities owned by LPI or joint ventures.
  2. Dividends that come from repayments due to liquidation exceed the amount of capital. However, dividends are free from tax if they are used to support business needs in the territory of the Republic of Indonesia within a period of 3 years from liquidation.
  3. LPI’s business development results and assets.
  4. Gain due to sale or due to transfer of property.
  5. Grant.
  6. Income related to placement of funds in financial instruments.
  7. Income from administration or asset management.
  8. Income from other legitimate sources in accordance with the provisions of the regulations.

Foreign Elements in Tax Objects

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

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

Tax Object Exception

Article 4 Paragraph (3) 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 conditions that must be met so that donations or assistance are free from taxes are the ratification of the establishment of a zakat amil body or religious institution as recipients by the government. Recipients of zakat who are not amil entities must also meet certain conditions such as being entitled to receive.
  2. Donations that are free from taxation must be received by blood relatives in a straight line of one degree. The institutions that are exempt from the tax on gifted assets are religious bodies or educational bodies or social organizations or small entrepreneurs including cooperatives as determined by the Minister of Finance.
    Inheritance.
  3. Cash deposit as a substitute for shares or as a substitute for capital participation received by the entity.
  4. Reimbursement or remuneration in connection with work or services received. The reimbursement that is excluded in this category is in the form of in-kind and/or enjoyment from the taxpayer or the government.
  5. Certain insurance payments.
  6. Insurance payments that are not subject to tax are health insurance, accident insurance, life insurance, endowment insurance and scholarship insurance.
  7. Contributions received or earned by the pension fund.
  8. Certain income pension funds.
  9. Share of profits received or accrued by members of limited partnership, partnership, association, firm, and joint venture.
  10. Bond interest earned by mutual fund companies for the first five years.
  11. Certain income of venture capital companies.
  12. Scholarship.
  13. Dividend between companies in Indonesia with certain conditions.
  14. The conditions that must be met so that dividends in Indonesia are tax free are:
    a.) Derived from retained earnings reserves.
    b.) The ownership of the tax subject’s shares in the dividend giving body is at least 25% of the total paid-up capital.
    c.) There is an active business owned by the dividend recipient other than the share ownership.
    d.) Dividends received or earned by limited liability companies are domestic taxpayers, cooperatives, and BUMN/BUMD.
    Assistance or compensation provided by the Social Security Administering Body (BPJS). Before being given,
  15. this assistance or compensation is handed over to certain taxpayers who are entitled to it.The remainder is received by agencies engaged in research and development. The requirements that must be met by research institutions so that the remaining funds are free from taxes:
  • Non-profit agency or institution in the field of education and/or research and development, which has been registered with the agency according to its field.
  • The remaining excess funds must be invested or invested in facilities and infrastructure for activities related to education, research and development.
  • The remaining funds are spent within a maximum period of 4 years from the receipt of the remaining funds.

Conclusion

When entering productive age and starting to work as an employee or employee, it’s good for  to understand the intricacies of taxation. This is because a portion of’ income 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 support the development of the country, we need to obey paying taxes.

Related posts

Leave a Reply

Your email address will not be published.