One of the company’s corporate actions to own another company is to buy most of the shares owned by another company. In the event that the Company acquires shares and there is a difference in the selling price between the book value of the shares and the sale and purchase value of the shares, goodwill will arise.
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Goodwill is a term for an intangible asset that reflects the difference between the transaction value and the book value. Goodwill is recorded in the statement of financial position (balance sheet) when there is a sale and purchase of company shares. In accordance with the applicable Financial Accounting Standards (SAK) in Indonesia, commercially, goodwill must be reassessed every year. If there is an impairment, the Accounting Standards require recognition of the impairment, which is recorded as an expense and a deduction from goodwill. If there is an increase in value, the accounting record records the increase in value as goodwill.
Taxation Aspect of Buying and Selling Shares: Capital Gain
The taxation aspect of buying and selling shares is capital gain, namely the value of the sale minus the book value (net assets) of the purchased company. The capital gain is presented in the profit and loss statement as other income (not operating income or sales group), if the shareholder whose shares are sold is a business entity. As for individual shareholders, the capital gain will follow the progressive tax rate for Individual Taxpayers (WPOP).
Tax Aspects of Sales of Fixed Assets
In many buying and selling transactions related to corporate corporate actions, what is being sold is not company shares but fixed assets (assets) belonging to the company. Taxation aspects related to the sale of fixed assets include income tax on the sale of assets and Value Added Tax (VAT).
Income Tax on Sales of Fixed Assets
Based on Article 4 paragraph (1) letter d of Law Number 7 of 1983 concerning Income Tax as amended several times, most recently by Law Number 7 of 2021 (“PPh Law”), it is stated that profits from sales or transfer of assets (fixed assets) is subject to income tax.
The sale of the Company’s fixed assets may result in profit or loss. If the Company sells fixed assets at a price that is higher than the book value or higher than the price or acquisition value, the difference in price is a profit that becomes the object of income tax. Losses due to the sale or transfer of fixed assets owned and used by the Company are expenses. which can be used as a deduction in calculating the amount of Taxable Income as long as the fixed assets are related to activities to earn, collect and maintain income.
Based on Article 10 paragraph (3) of the Income Tax Law it is stipulated that for sales transactions of fixed assets in the context of liquidation, merger, consolidation, expansion, splitting, or business acquisition, the acquisition value or transfer of assets is the amount that should be issued or received based on market prices.
In accordance with the provisions in Article 4 paragraph (2) letter d of the Income Tax Law, the income received by the Company from the transfer of fixed assets in the form of land and/or buildings is subject to final income tax.
In Article 2 paragraph (1) Government Regulation No. 34 of 2016 the amount of income tax from the transfer of land and/or building rights is:
a. 2.5% of the gross amount of the transfer of rights over land and/or buildings other than the transfer of rights over land and/or buildings in the form of simple houses or simple flats carried out by taxpayers whose main business is transferring rights over land and/or buildings;
b. 1% of the gross amount of the transfer of rights over land and/or buildings in the form of Simple Houses and Flats made by Taxpayers whose main business is transferring rights over land and/or buildings; or
c. 0% for the transfer of land and/or building rights to the government, state-owned enterprises that receive special assignments from the Government, or regional-owned enterprises that receive special assignments from regional heads, as referred to in the law governing land acquisition for development for the public interest.
Income tax payable must be paid by the Company itself no later than the 15th (fifteenth) of the following month after the month the payment was received.
From the buying company side, there is an obligation to pay Land and Building Rights Acquisition Fees (BPHTB). The BPHTB rate is 5% of the selling price minus the Acquisition Value of Non-Taxable Tax Objects (NPOPTKP). The number of NPOPTKP will be determined based on the area where the land and/or building is located.
Value Added Tax on Sales of Assets
In accordance with Article 16D of Law Number 8 of 1983 concerning Value Added Tax (PPN), as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations, it is stated that Value Added Tax (VAT) is imposed on the delivery of Goods subject to Tax (BKP), in the form of assets including machinery, buildings, equipment, furniture, or other BKP which according to their original purpose were not for sale and purchase by Taxable Entrepreneurs (PKP).
VAT is not imposed on the transfer of Taxable Goods that do not have a direct relationship with business activities and the transfer of assets, which according to their original purpose were not for sale and purchase, namely motorized vehicles in the form of sedans and station wagons, which according to the provisions of Article 9 paragraph (8) letter b and letter c Input Tax VAT Law on the acquisition of these assets cannot be credited.
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