Article 4(3) Income Tax on Donations
- Maulana Ibrahim, Andre Wilson Siregar, Ellicia Emerliawati, & Nugraha Wira Taruna
- Aug 11
- 4 min read
Donations Excluded as Tax Objects
In modern civilization, there are methods used in order to fulfill the socio-economic needs of the public, provide public facilities, and increase the public’s welfare aggregately. One of the ways to do that is by providing donations and aid, where in Indonesia, there are several organizations and institutions ratified by the government. Those institutions ratified by the government are institutions with no objective of earning maximum profit, but rather to redistribute the received donations for those in need.
The objective of social institution development itself is to justify the reasoning why donations fulfilling certain criteria, with the goal of increasing the public welfare, are exempt from being a taxable object.
Tax Subject
The tax subject of the tax object exemption on Article 4(3) Income Tax is Individual or Corporate Taxpayers, fulfilling these criteria, including:
Blood-related family members in a straight line and/or one degree
Non-profit religious institutions that have been ratified by the government
Non-profit educational institutions
Non-profit social institutions that arrange:
Health maintenance
Elderly maintenance or Nursing homes
Orphan, both fatherless and motherless, maintenance, abandoned children or persons, and disabled children or persons
Aid or help for victims of natural disasters, accidents, and of said nature
Scholarship aid, and/or
Nature conservation
Cooperation
Individuals running small and micro enterprises that fulfill several requirements, including:
Owning net assets with a maximum amount of IDR500,000,000 (five hundred million rupiah), excluding land and building of the enterprise, or
Owning a yearly revenue until IDR2,500,000,000 (two billion five hundred million rupiah)
where there are no business, occupational, ownership, or controlling relationships between related parties.
Non-Tax Object
Donations in the form of cash or goods received by Domestic Individual or Corporate Taxpayers.
Donations include:
zakat, infaq, and donations received by the zakat agency or institutions made and ratified by the government, and are received by the entitled recipient
obligatory religious donations for the followers of the religion acknowledged in Indonesia, where it is received by a religious institution made or ratified by the government, and are received by the entitled recipient
is exempted from being an Income Tax object as long as there are no business, occupational, ownership, or controlling relationships between related parties.
Criteria
Donations that are exempt from becoming a tax object must fulfill 2 (two) criteria, such as:
donations are received by:
blood-related family members in a straight line and/or one degree
non-profit religious institutions that have been ratified by the government
non-profit educational institutions
non-profit social institutions
cooperation
individuals running a micro or small business
the giving of the donation is done without any business, occupational, ownership, or controlling relationships between related parties.
Definitions of previously mentioned terms, include:
Relationship of business between related parties is a relationship where there are regular transactions between the giver and the receiver.
Relationship of occupation between related parties is a relationship where there is a working, service-providing, or activity arrangement, directly or indirectly, between the giver and the receiver.
Relationship of ownership between related parties is a relationship that happens when there is capital equity given directly or indirectly between the giver and the receiver, as mentioned in Article 18(4) letter a of the Income Tax Law.
Relationship with control between related parties that happens when there is direct or indirect control in the relationship between the giver and the receiver, as mentioned in Article 18(4) letter b of the Income Tax Law.
Specific Requirements
In the case of an apparent relationship of ownership or control, as previously mentioned, the donations received will still be exempt from being an Income Tax Object as long as the receiver is a religious, educational, or social institution, including foundations.
Donation-Receiver Filing Obligation
The donation recipient will have the obligation to file all assets received from donations in their Annual Tax Returns in the non-taxable objects section.
In addition, grant recipients will also be obligated to file all assets received from donations in the Annual Tax Returns’ asset elements starting from the year said asset is received, with the acquisition value of:
The remaining fiscal book value if the granting party is required to maintain bookkeeping, or
Other values if the giver does not do bookkeeping.
Other values, as mentioned, include:
For assets in the form of land and/or buildings:
the Tax Object Sales Value stated in the Land and Building Tax Payable Tax Notification Letter for the tax year in which the transfer occurred, or
a statement from the Government Agency in charge of regional tax affairs, where the land and/or building is registered in the event that there is no Land and Building Tax Payable Tax Notification Letter.
For assets other than land and/or buildings, the equal amount to the market price of the assets at the time of the transfer.
Case Study
Anna is a businesswoman with a monthly activity of donating in the form of zakat of IDR50,000,000 to Badan Amil Zakat Nasional (BAZNAS), an institution whose development has been ratified by the government. On the donation of IDR50,000,000 given by Anna each month, the income is an income exempt from being an income tax object for BAZNAS as the donation recipient.
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
Government Regulations Number 55 Year 2022 regarding the Adjustment of Regulation in the Field of Income Tax
The Minister of Finance Regulations Number 90/PMK.03/2020 on Aid or Donations, As Well As Grants Excluded from Income Tax Objects
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