Article 4(3) Income Tax on Capital Assets Deposit
- Maulana Ibrahim, Andre Wilson Siregar, Ellicia Emerliawati, & I Made Arya Wira Utama
- 7 days ago
- 2 min read
Capital Assets Deposit Excluded as Tax Objects
Capital is one of the most important factors in a business. In accounting terms, capital deposits for a company are not considered income. In addition, from a taxation lens, this notion is further reinforced by Article 4(3) of the Income Tax Law, which states that deposits in the form of assets, including cash deposits, are not considered taxable objects.
Table of Contents
Tax Subject
Domestic Corporate Taxpayers that receive assets, including cash transfer as a substitute for shares, or as a substitute for capital equity.
Non-Tax Object
Assets, including cash deposits received by corporate entities as a share substitute or as a capital equity substitute.
Asset Receiver Obligation
Corporate Taxpayers as asset receivers must report all their assets received from capital transfer transactions in Attachment IV of the Annual Tax Return in the Non-Taxable Object section.
Furthermore, the Corporate Taxpayer is also obligated to report changes in ownership as well as the deposited capital amount on their Corporate Taxpayer Tax Returns in Attachment V on the Shareholders List/Capital Owner following the amount of additional capital received.
Case Study
Mr. Bintang found an investment opportunity in a manufacturing company owned by his friend, PT Abadi Manufaktur. Mr. Bintang wants to do a cash deposit of IDR900 million for 10% of the PT Abadi Manufaktur ownership.
Tax Implications when Cash Deposit is Given:
When PT Abadi Manufaktur received the cash deposit as additional capital from Mr. Bintang, the deposit is not considered as taxable income for PT Abadi Manufaktur since the cash deposit fulfilled the criteria for tax objected exempted from income tax as regulated in Article 4(3) letter c Income Tax Law, where cash deposits are considered as substitute for capital equity.
Legal Basis
Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 6 Year 2023 regarding Stipulation of Government Regulation in Lieu of Law Number 2 Year 2022 on Job Creation to Become Law
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