What is Income

Income tax is levied on income earned or accrued during the tax year. In its broadest sense, income refers to increases in economic performance that can be used to increase consumption and wealth, both within Indonesia and outside Indonesia. Income can be broadly divided into income subject to final tax, income subject to general corporate tax rate,  and non-taxable income (income is not subject to tax).

Typical type of income, including:

1. reimbursements or compensations in relation to work or services, that are received or obtained including salaries, wages, allowances, honoraria, commissions, bonuses, gratuities, pensions, or compensations in other forms, including any incomes in-kind and/or other enjoyments, unless therwise determined in this Law;
2. prizes from lotteries or works or activities, and awards;
3. operating profit;
4. gains from the sale or transfer of assets, including:
   • gains from transfer of assets to a company, partnership, and other entities in exchange of shares or equity participation;
   • gains from transfer of assets to shareholders, partners, or members that are obtained by companies, partnerships and other entities;
   • profit due to liquidation, merger, amalgamation, expansion, demerger, business takeover, or reorganization in any name and in any form of whatsoever;
   • gains from transfer of assets in the form of grants, aids, or donations, except for those given to biological family (keluarga sedarah) within one degree of direct lineage and religious agencies, educational agencies, social institutions including foundations, cooperatives, or individual persons who run micro and small business, as long as do not have relationship ith business, employment, ownership, or control among the relevant parties; and
   • profits due to sale or transfer of part or all of mining rights, certificate of participation in financing, or capital in a mining company;
     
5. receipts of tax refund that have been charged as cost and additional payment of tax refund;
6.  interests including premiums, discounts, and compensations due to debt repayment security;
7. dividends in any name and any form, including dividends from insurance companies to policyholders;
8. royalties or compensations for the use of rights;
9. rents and other incomes in relation to the use of assets;
10. receipt or acquisition of periodic payments;
11. profits due to debt easement, except up to a certain amount as stipulated by a Government Regulation;
12. profit from foreign exchange rate;
13. surplus due to asset revaluation;
14. insurance premiums;
15. contributions received or obtained by an association from its members consisting of Taxpayers who carry on business or carry out independent work;
16. increase in net wealth originating from incomes that have not been taxed;
17. incomes from sharia-based businesses;
18. interest compensation as referred to in the Law that governs general provisions and procedures f taxation; and
19. surplus of Bank of Indonesia.