Definition of income tax-Income tax is no stranger to the public, but few people know the ins and outs of this tax well. Income Tax is a tax impos on the income of both individuals and entities. As a taxpayer, the public needs to understand this income tax comprehensively. Thus, taxpayers can also be responsible for carrying out their obligations properly. Read this article in full about the definition, types and objects of income tax.
Definition Of Income Tax
Income tax is a tax impos on an income originating from the taxpayer. This income can be obtain from someone either living in the country or abroad.
While the legal umbrella regarding income tax is enshrin in the Income Tax Law No. 7 of 1983. The law on this tax has been amend four times, namely:
1.The first change is contained in Law No. 7 of 1991.
2.The second amendment is contain in Law No. 10 of 1994
3.The third amendment is contain in Law No. 17 of 2000.
4.The fourth amendment is contain in Law Number 36 of 2008
Meanwhile, the latest regulation regarding income tax is contain in the Job Creation Law no. 11 of 2020. In addition, there is a Harmonization Law, namely the HPP Law or Tax Regulations which was ratifi in October 2021.
Types of Income Tax or PPH
Income tax or PPh is divid into several types that taxpayers need to know.
1.Private Person (OP)
Income tax or income tax is that which is impos on individual or personal taxpayers such as employees, non-employees, and entrepreneurs. The intended taxpayer can live in Indonesia or abroad.
2.Company or Agency
Income tax or income tax is what is impos on taxpayers in the form of companies or entities.
Entities are tax subjects which can be in the form of PT (Limit Liability Company), CV (limited company, firm, cooperative (kongsi), and others.
The subject of Corporate Income Tax consists of:
- An agency established and domiciled in the country.
- Badan yang tidak didirkan dan tidak berkedudukan di dalam negeri, serta yang melakukan usahanya lewat bentuk usaha tetap dan berada di dalam negeri.
The subject of the PPh tax is that the income tax from inheritance that has not been divid can still be carri out. This inheritance is a substitute for the obligations of the heirs. However, if the inheritance has been divid, it is the obligation of the heirs to pay taxes.
4.Permanent Business Entity or BUT
The subject of income tax is the same as the subject of domestic corporate tax. BUT is a form of business us by tax subjects abroad who have activities in Indonesia, either individually or in the form of an entity.
BUT must be register as a taxpayer in order to obtain a NPWP. The tax is impos on the basis of taxable income using the rates applicable to domestic tax subjects.
Income Tax Object
The object of income tax is income and additional financial capabilities obtained by individuals and companies. The income is collect to be us in consumption activities and increase wealth. There are 7 types of tax objects that you need to understand, including:
- Dividends are a portion of the income that is given to the shareholders of the company as income. If you get a dividend, then you will be tax.
- Gross profit from your business.
- Profits due to trading or transfer of assets, including profits obtained by a company, partnership, and other entities due to transfer of assets or liquidation.
- The interest you earn, including premiums and discounts.
- Honorarium, prizes obtained from sweepstakes, as well as certain awards.
- Salary from work, benefits, additional income/incentives, pension funds, and other benefits based on your work.
- Receipt of payment of tax that has been charg to the tax subject as the cost of paying additional tax refunds.
Income Tax Subject
The tax subject is the party who is subject to tax and is oblig to pay tax to the Indonesian government if it has compli with the provisions. Who is it? Here’s the explanation.
- Individuals who already earn and the amount meets the minimum taxable standards, are oblig to pay taxes regularly.
- Inherit assets that are still a unit and have not been divid among those who are entitl.
- Permanent form or business entity