Surplus value based on Article 4 of the Regulation of Minister of Finance Number 68 of 2020 is the excess difference from the calculation of all income received or obtained other than income subject to the final income tax and / or not the object of income tax, deducted by the expenses to obtain, collect, and keep the income. This surplus is usually generated from operational activities, donations, and various other forms of funding. However, this surplus value is not obtained for commercial purposes, but to support the sustainability of the social programs or activities carried out. The remaining surplus obtained by non-profit institutions is included in the category of income which is the object of income tax. The surplus value owned by non-profit institutions at the end of the fiscal year is considered taxable income. The surplus value can be exempted from the imposition of income tax if it meets the conditions contained in Article 4 Paragraph 3 of The Income Tax Law. The requirements are the types of institutions engaged in the field of education and also the field of research and development (R&D). This is excluded from the object of income tax if it is reinvested in the form of facilities and infrastructure within a maximum of 4 years. Not only educational and R&D institutions that can be exempted from tax objects, social or religious institutions that reinvest their surplus in the form of facilities can also be exempted. The use of surplus value can also be allocated in the form of an endowment fund, which can then be given to other institutions or entities as long as they are located within the country of Indonesia.
The institution must create a report on the amount of surplus value used for the development or procurement of facilities and infrastructure. Then the report is submitted to the head of the tax office where the taxpayer is registered, as an attachment to the income tax return in addition, the institution is also required to create a record of the details of the use of surplus value equipped with supporting documents or evidence. If there is surplus value that is not used for the procurement of facilities and infrastructure within a period of four years, it will be recognized as a tax object after the four year period ends. The amount of surplus will be reported as an additional income tax object in the annual tax return where the surplus is recognized as a fiscal correction.
By Olina Rizki Arizal – Partner TBrights
TBrights is a tax consultant in Indonesia which is currently an integrated business service in Indonesia that can provide comprehensive tax and business services
Reference:
- The Regulation of The Minister of Finance Number 68 of 2020 on Income Tax Treatment of Scholarships that Meet Certain Requirements and the Remaining Surplus Received or Obtained by Non-Profit Entities or Institutions Engaged in the Field of Education and / or the Field of Research and Development
- The Income Tax Law Number 7 of 1983
