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6.6. Excluded and Segregated Income

Article 4(3) of Income Tax Law stipulates that the following income is non-taxable:

  • Dividends or distribution of profits received or obtained by resident companies, cooperatives, and state-owned / local government-owned companies, from ownership in companies established and domiciled in Indonesia, provided that the dividends are paid out from retained earnings;.
  • Income received or obtained by a venture capital company in the form of profit distribution of a joint-venture company established and performing its activities in Indonesia, provided the business partner company:
    • Is a micro, small, or medium enterprises, or engaged in specified sectors; and
    • Its shares are not traded on a stock exchange in Indonesia;
  • Assets, including cash contributions received by company in exchange for shares or capital contribution;
  • Income from invested capital by approved pension funds, in certain areas as defined by the Ministry of Finance;
  • Distribution of profits received or obtained by a member of a limited partnership whose capital does not consist of shares, partnership, association, firms, and joint venture, including holders of collective investment contract unit;
  • Grants or donations received by a religious institution established or approved by the government;
  • Grants received by relatives within one-degree of straight lineage, religious bodies, educational or social institutions, including foundation, cooperative or individuals who carry on small and micro business;
  • Inheritance;
  • Payment from insurance company to an individual in connection with health, accident, life, endowment, and scholarship insurance;
  • Surplus balance received by a non-profit corporate or institution engaged in education and or research and development, if registered at related institutions and if the surplus is reinvested in the form of educational activities infrastructure and facilities and/or research and development, within a maximum of four years;
  • Assistance or compensation paid by Administering Social Security Agency (“Badan Penyelenggara Jaminan Sosial”) to certain taxpayers.
  • Income received by resident taxpayers from offshore activities provided they are reinvested for at least 30% of their amount in Indonesia. The reinvestment must follow the requirements listed in the Ministry of Finance Decree.