The taxation of companies listed on the Indonesia Stock Exchange (IDX) is generally the same as that of private companies. Companies registered on the IDX are Domestic Corporate Taxpayers (WPDN Badan). Tax compliances attached to Domestic Corporate Taxpayers are Income Tax (PPh) and Value Added Tax (VAT). There are 3 (three) types of tax collection systems in Indonesia, namely self-assessment system, official assessment system and withholding assessment system.
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A self-assessment system is a tax collection system that gives trust to taxpayers (WP) to calculate, pay and self-report the amount of tax owed based on regulations such as VAT and PPh taxes. Official assessment system is a tax collection system that authorizes tax officers to calculate the amount of tax owed based on regulations such as Building and Land Tax (PBB) or other types of regional taxes. Withholding system is a tax collection system that requires other taxpayers to make withholding or collection of taxes and requires taxpayers who make the withholding to immediately deposit it to the state such as PPh Article 21, PPh Article 22, PPh Article 23, PPh Final Article 4 paragraph (2) and VAT.
Additional Sources of Funding for Listed Companies
Companies listed on the IDX can obtain new sources of funding through the sale of shares to the public. Stocks are an investment option that is in demand by investors because they can provide additional income in the form of capital gains and dividends. Capital gain is the amount of an investor’s profit when reselling his investment assets, since the selling price is greater than the purchase price of the investment product. Dividends are the share of profits distributed and received by shareholders.
In the context of taxation, additional income in the form of capital gains and dividends is an object of final income tax (PPh). However, it should be underlined that not all dividends are tax objects because there are conditions where the profits received are not tax objects.
Listed Company Tax Rates for Shares’ Sale Transactions: Final Income
The Final Income Tax rate on the sale of shares of companies listed on the stock exchange is divided into 2 (two) types, namely the Final Income Tax payable for founder shares and not founder shares. In the Decree of the Minister of Finance of the Republic of Indonesia No. 282 / KMK.04 / 1997 Article 1 Point (1) and (2) it is explained that the founder is a private person or entity whose name is recorded in the Register of Shareholders of a Limited Liability Company, or stated in the Articles of Association of a Limited Liability Company before the Registration Statement made by the Capital Market Supervisory Agency (Bapepam) in the context of an initial public offering becomes effective.
The definition of founder also includes a private person or entity that receives a transfer of shares from the founder because of the following:
b. Grants that meet the requirements of Article 4 Paragraph (3) Letter A No. 2 of Law No. 7 of 1983 concerning Income Tax as last amended by Law No. 10 of 1994;
c. Other means not subject to Income Tax at the time of such transfer.
KMK 282/KMK.04/1997 Article 1 Paragraph (3), the definitions of the founder’s shares are as follows:
a. Shares acquired by the founder derived from the capitalization of Additional Paid-In Capital which is issued after the initial public offering;
b. Shares derived from the founder’s stock split.
Income Tax Deductions and Reporting
Deduction of Income Tax by Stock Exchange Organizer
0.1% of the gross value of the shares’ sale transaction
The sale of the founder's shares transaction applies an additional rate of 0.5% of the value of the company's shares at the time of the closing of the stock exchange at the end of 1996.
The founder’s shares sale transaction traded after January 1, 1997 applies an additional rate of 0.5% of the company's share price at the time of the initial public offering.
0.1% of the gross value of the shares’ sale transaction
Income Tax on the sale of shares will be deducted by the organizer of the stock exchange through a securities intermediary at the time of repayment of the transaction. The organizer of the stock exchange is obliged to deposit Income Tax to the state no later than the 20th (twentieth) of each month, on the shares’ sale transaction carried out the previous month and is obliged to submit a report on the withholding and depositing income tax to the Tax Service Office no later than the 25th (twenty-fifth) day in the same month as the deposit month.
Additional Income Tax Deposits for Founder Shares
Additional deposits of Income Tax on the founder’s shares are made by the issuer on behalf of the owner of the founding shares to the tax office no later than:
a. 6 (six) months after May 29, 1997, if the company’s shares have been traded on the stock exchange before that date;
b. 1 (one) month after the shares are traded on the exchange, if the shares of the new company are traded on the stock exchange on or after May 29, 1997.
Taxation of Dividends for Listed Companies
In Law No. 36 of 2008 Article 4 Paragraph 1 Letter G, dividends that tax objects are dividends of any kind, including dividends from insurance companies to policyholders, and the distribution of the remaining proceeds of cooperative business. While in Article 4 Paragraph 3 Letter F, dividends that are not tax objects are dividends or part of the profit received or obtained by a limited liability company as a domestic taxpayer, cooperatives, state-owned enterprises, or regionally owned enterprises, from capital participation in business entities established and domiciled in Indonesia with the conditions that:
- Dividends come from retained earnings reserves; and
- Share ownership in the entity that pays dividends is at least 25% of the amount of paid-in capital
Tax Rate for Dividend
10% of gross income
[Final Income Tax Article 4 Paragraph 2]
20% of gross income for taxpayers from Non-Tax Treaty Country
[Income Tax Article 26]
15% of gross income (For Registered Taxpayers)
[Income Tax Article 23]
* Does not apply to share ownership > 25%.
Dividends from within the country or abroad received by resident taxpayers can be given the facility of exclusion from the object of income tax as long as it meets the specified requirements. The details of dividends granted exemption facilities from the object of income tax are as follows:
Source of Dividends
Domestic Private Persons
Excluded from the Object of Income Tax with the condition that it must be invested in the territory of the Unitary State of the Republic of Indonesia within a certain period of at least 3 years from the time the dividend is received or obtained.
Excluded from the Object of Income Tax on the condition that it must be invested or used to support other business activities in the territory of the Unitary State of the Republic of Indonesia within a certain period of at least 3 years from the time dividends are received or obtained.
Excluded from the Object of Income Tax without condition that must be invested.
Tax Incentives for Listed Companies
IDX stated that the government provides tax incentives for listed companies or public companies through a decrease in Corporate Income Tax rate of 3 (three) percent lower than that of non-listed companies. This is regulated in the Government Regulation of the Republic of Indonesia Number 30 of 2020 concerning Reducing Income Tax Rates for Domestic Corporate Taxpayers which is in the form of a Public Company.
However, not all companies can use a 3 percent lower rate because they must meet the requirements stipulated in Article 3. The requirements that must be met are as follows:
a. Domestic Taxpayers which are in the form of a Public Companies;
b. With all paid-up shares traded on the Indonesian Stock Exchange at least 40% (forty percent);
c. The shares must be owned by at least 300 (three hundred) parties;
d. Each party may only own less than 5% (five percent) of the total issued and paid-up shares;
e. Provisions B, C, and D must be fulfilled within a minimum of 183 (one hundred and eighty-three) calendar days within a period of 1 (one) tax year; and
f. Submit a report to the Directorate General of Taxes.
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