The Investment Instrument for Dividends to Be Income Tax Exempt!

JAKARTA, DDTCNews – The season of dividend distribution by issuers listed on the Indonesia Stock Exchange (IDX) is underway. In this case, investors may take advantage of incentives from the government, namely in the form of exemption from Income Tax on dividends.

As stipulated under the Minister of Finance Regulation (MoF Reg.) 18/2021, to obtain Income Tax exemptions on dividends, investors must reinvest accrued dividends for 3 years in investment instruments determined by the government.

“Dividends excluded from taxable objects are dividends distributed based on the GMS/interim dividends,” stated the DGT on its official Twitter account @kring_pajak, Tuesday (21/4/2022).

Further, MoF Reg. 18/2021 stipulates that reinvestments may be realised in financial market instruments in the form of debt securities (including medium-term notes), sharia bonds, shares, participation units of mutual funds, asset-backed securities, participation units of real estate investment funds, time deposits/savings and checking/current accounts.

Next, futures contracts traded on futures exchanges in Indonesia and/ or other financial market investment instruments, including insurance products linked to investments, financing companies, pension funds or venture capital, which are approved by the Financial Services Authority (Otoritas Jasa Keuangan, hereinafter referred to as OJK).

In reinvestments outside the financial market, dividends may be invested in infrastructure investment instruments through government cooperation with business entities, real sector investments based on priorities stipulated by the government, investments in property in the form of land and/or buildings erected thereon and direct investments in companies in the territory of the Unitary State of the Republic of Indonesia.

Dividends may also be distributed through investments in precious metals in the form of gold bars or bullions with a purity of 99.99% produced in Indonesia and accredited and certified by the Indonesian National Standard (Standar Nasional Indonesia, hereinafter referred to as SNI) and/or the London Bullion Market Association (LBMA).

In addition, reinvestments may be performed through cooperation with investment management institutions, use to support other businesses in the form of loans to micro and small businesses within the territory of the Unitary State of the Republic of Indonesia pursuant to statutory provisions in the MSME sector and/or other forms of legitimate investments outside the financial market pursuant to statutory provisions.

Kindly note that there is a deadline for reinvestments. After the tax year the dividends are received ends, reinvestment shall be performed no later than the end of the third month for individual taxpayers or the end of the fourth month for corporate taxpayers.

Although not constituting Income Tax objects, dividends that are excluded from Income Tax objects continue to be filed on the Annual Tax Return. Dividends may be filed in the Income Not Included as Taxable Objects in Other Income Posts Not Included as Taxable Objects section.

In addition to filing the Annual Tax Returns, every year, taxpayers must also report investment realisation on DJP Online. (sap)