Article 4(3) Income Tax on Pension Fund Contributions
- Maulana Ibrahim, Andre Wilson Siregar, Ellicia Emerliawati, & I Made Arya Wira Utama
- Aug 11
- 2 min read
Pension Fund Contributions Exempted from Tax Imposition
Pension fund contributions are a type of contribution paid by employers or employees as ways to prepare for retirement. Within the taxation scope, contributions received by pensioners are not considered as an income tax object since the government provides an exemption from taxes on pension fund contributions to assist retirement programs.
Tax Subject
Pension Fund Corporate Taxpayers whose establishment has been ratified by the Financial Services Authority that received or obtained income in the form of pension fund contributions.
Tax Object
Income in the form of contributions received or obtained by Pension Funds from pensioners, both paid by the employee themselves or borne by the employer.
Criteria
Contribution received by pension funds exempted from tax imposition is a contribution received by pension funds, of which its establishment has been ratified by the Financial Services Authority, including pension funds that are ratified by a Minister prior to a switch in function, assignment, and responsibility of regulating and supervising pension funds from the Minister to the Financial Services Authority on 31 December 2012.
Pension Fund Contribution Receiver Obligation
Pension funds, as the contribution receiver from pensioners, that follow the law and regulations, have the obligation to report their entire income received from contributions in the Annual Tax Returns in the non-taxable income section.
Case Study
Company A is a company that cares about its employees’ well-being and follows the regulations. As a way to prove their dedication, Company A pays pension fund contributions to the Employees' Social Security System each month.
Tax Implications on Contributions Received by the Employees' Social Security System:
Income in the form of contributions received by the Employees' Social Security System from Company A is not considered as an income tax object since the development of the Employees' Social Security System has fulfilled the criteria as mentioned in the Tax Laws and Regulations.
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
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