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The Directorate General of Taxes (DJP) has revisited the provisions regarding grants / gifts that are not subject to income tax (exempted from tax). What are grants? And are grants taxable? Here’s the explanation.
According to KUH Perdata Article 1666, a grant is a gift from the grantor to another person as the recipient, given free of charge and irrevocably, involving movable or immovable property while the grantor is still alive.
Example: A father (as the grantor) gives a plot of land to his child (as the recipient) while the father is still alive, this is considered as a grant. However, if the plot of land is given after the father passed away, it is considered as a will, not a grant.
The next question is, are such grants subject to income tax in Indonesia?
According to PMK No. 90/PMK.03/2020, grants which are exempted from income tax (non-taxable) are those grants given to: a) Immediate family in a direct lineage; b) Religious Organizations; c) Educational Institutions; d) Social Organizations, including Foundations; e) "Koperasi"; f) Individuals running micro and small businessess. In addition, the grants must not be accompanied by any business interests or benefits to the grantor.
Therefore, grants that do not meet above criterias are considered as taxable grants and are subject to income tax of the recipients.
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