The Ministry of Finance has issued a regulation concerning the deduction of gross income for the exemption of donations and costs of social infrastructure development. The policy is stipulated under the Minister of Finance Regulation No. 62/PMK.03/2021 concerning Procedures for the Involvement of the Central Government and/or Regional Governments in the Context of Imposing Donations and/or Costs of Social Infrastructure Development Deductible from Taxpayers’ Gross Income of in the Mineral Mining Business Sector (MoF Reg. 62/2021).
This regulation has been issued as an implementing regulation of Government Regulation no. 37 of 2018 concerning Tax Treatment and/or Non-Tax State Revenues in the Mineral Mining Business Sector. Promulgated on 14 June 2021, MoF Reg. 62/2021 has come into force thereafter.
As per Article 1 of MoF Reg. 62/2021, the amount of taxable income for taxpayers that conduct business in the mineral mining sector is determined based on gross income subtracted by costs to earn, collect, and maintain income.
Costs to obtain, collect, and maintain such income include expenses in the form of donations and/or costs through certain agencies/institutions. Said donations and/or costs may be given in the form of money and/or goods. Expenses in the form of donations and/or costs may include the following five things:
donations in the context of national disaster management, which constitute donations for victims of national disasters submitted through disaster management agencies or institutions/parties that have obtained permission from the competent agencies/institutions;
donations in the context of research and development, which constitute contributions to research and development carried out in the territory of the Republic of Indonesia submitted through research and development institutions;
donations of educational facilities, which constitute donations in the form of educational facilities submitted through educational institutions;
donations in the context of sports development, which constitute contributions to fostering, developing, and coordinating an organization or a group of organizations of branches/types of competitive sports submitted through sports coaching institutions; and
social infrastructure development costs, which constitute costs incurred to provide facilities and infrastructure for the public interest including in the health sector, and are non-profit in nature through institutions engaged in community improvement and development.
The institutions referred to in points (ii), (iii), (iv), and (v) are philanthropic institutions that involve the central government and/or regional governments in the donation distribution program.
In the event that the expenses in the form of donations and/or costs are directly submitted in the form of facilities and/or infrastructure to the central government and/or regional government, the donation is deemed to have been fulfilled. Donations are directly submitted by taxpayers to the central government and/or regional governments as per statutory provisions.
Philanthropic institutions involve the central government by adjusting the philanthropic institutions’ donation distribution programs based on the central government’s policy programs. On the other hand, philanthropic institutions involve regional governments by adjusting the philanthropic institutions’ distribution programs based on regional governments’ policy programs.
Philanthropic institutions involve the central government and regional governments by adjusting the donation distribution programs to the policy programs of the central government and regional governments. The involvement of the central government and/or regional governments by the donation-collecting institution is evidenced by an approval document on the donation distribution program plans by the donation-collecting institution.
A taxpayer’s expenses in the form of donations and/or costs in the mineral mining business sector may be deducted from gross income if the following five requirements are met:
the taxpayers do not suffer tax losses based on the annual income tax return for the previous tax year;
donations and/or costs do not result in any losses in the Tax Year the donation is made;
supported by valid evidence;
donations and/or costs submitted through disaster management agencies or institutions/parties that have obtained permission from the competent authorities and/or philanthropic institutions involving the central government and/or regional governments in the donation distribution programs; and
donations and/or costs are not submitted through an affiliated donation-collecting institution.
Expenses on social infrastructure development, on the other hand, may be submitted directly to the central government and/or regional government if the following three elements are met:
the taxpayer does not suffer tax losses based on the annual income tax return for the previous tax year;
donations and/or costs do not result in any losses in the tax year the donation is made; and
supported by valid proof of donation receipt from the central government and/or regional governments.
Further, taxpayers giving donations are required to report receipts of donations and/or costs to the Director General of Taxes. Taxpayers report receipts of donations by filling out and submitting forms for receipts of donations and submitting copies of approval documents.
A copy of the approval document does not need to be submitted if the expenses of donations and/or costs are directly submitted in the form of facilities and/or infrastructure to the central government and/or regional government.
Reports of donation receipt are submitted electronically through the Directorate General of Taxes’ (DGT) website or other channels integrated with the DGT’s system. Receipts of donations are to be reported no later than upon the submission of the annual income tax return for the tax year concerned. Provisions on the reporting of receipts of donations take effect from 1 January 2022.
Moreover, this regulation also stipulates that philanthropic institutions are required to submit reports of donation collection to the Director General of Taxes. Reports of donation collection by philanthropic institutions are adjusted to the provisions on donations to national disaster management, research and development donations, educational facilities donations, sports development donations, and social infrastructure development costs that are deductible from gross income.