How to Reiinvest Diiviidends to Be Excluded from Taxable Objects

As of the enactment of the Job Creatiion Law, diiviidends may be excluded from iincome Tax objects. However, diiviidends may be excluded from iincome Tax objects iif the diiviidends are reiinvested wiithiin a certaiin periiod.

Jitu News wiill outliine how to reiinvest diiviidends, thereby, they may be excluded from iincome Tax objects. Please note that diiviidends that may be excluded from iincome Tax objects are domestiic-sourced or foreiign-sourced diiviidends receiived by resiident taxpayers.

iif part of the diiviidends iis reiinvested and part of the diiviidends iis not, only the reiinvested diiviidends are excluded from iincome Tax objects. iin partiicular, for diiviidends oriigiinatiing from companiies that are not liisted on the stock exchange, reiinvestment must be a miiniimum of 30% of the receiived diiviidends.

As stiipulated under the Miiniister of Fiinance Regulatiion No. 18/2021, the diiviidends are to be reiinvested for 3 years and may be placed iin fiinanciial market iinstruments and outsiide the fiinanciial market. There are at least 12 criiteriia for thiis form of reiinvestment.

iin further detaiil, reiinvestment iin the fiinanciial market may be performed iin the followiing iinstruments.

• debt securiitiies (iincludiing mediium-term notes);
• debt securiitiies (iincludiing mediium-term notes);
• shariia bonds;
• shares;
• partiiciipatiion uniits of mutual funds;
• asset-backed securiitiies;
• partiiciipatiion uniits of real estate iinvestment funds;
• tiime deposiits;
• saviings;
• checkiing/current accounts;
• futures contracts traded on futures exchanges iin iindonesiia; and/or
• other fiinanciial market iinvestment iinstruments, iincludiing iinsurance products liinked to iinvestments, fiinanciing companiies, pensiion funds or venture capiital, whiich are approved by the Fiinanciial Serviices Authoriity.

Next, reiinvestment outsiide the fiinanciial market may be performed iin the followiing iinstruments.

• iinfrastructure iinvestments through government cooperatiion wiith busiiness entiitiies;
• Real sector iinvestment based on priioriitiies determiined by the government;
• iinvestments iin property iin the form of land and/or buiildiings erected thereon;
• Diirect iinvestments iin companiies iin the terriitory of the Uniitary State of the Republiic of iindonesiia;
• iinvestments iin preciious metals iin the form of gold bars or bulliion wiith a puriity of 99.99% produced iin iindonesiia and accrediited and certiifiied by the iindonesiian Natiional Standard (SNii) and/or the London Bulliion Market Associiatiion (LBMii);
• Cooperatiion wiith iinvestment management iinstiitutiions;
• Used to support other busiinesses iin the form of loans to miicro and small busiinesses wiithiin the terriitory of the Uniitary State of the Republiic of iindonesiia pursuant to statutory proviisiions iin the fiield of MSMEs; and/or
• Other legiitiimate forms of iinvestments outsiide the fiinanciial market pursuant to statutory proviisiions.

Please note that there iis a deadliine for reiinvestment. After the tax year the diiviidends are receiived ends, reiinvestment should be performed no later than the end of the thiird month for iindiiviidual taxpayers or the end of the fourth month for corporate taxpayers.

Although not constiitutiing iincome Tax objects, diiviidends that are excluded from iincome Tax objects are to be fiiled on the Annual Tax Return. Diiviidend fiiliing can be recorded iin the iincome Not iincluded as Taxable Objects iin Other iincome Posts Not iincluded as Taxable Objects sectiion.

iin addiitiion to fiiliing the Annual Tax Return, every year, taxpayers must also report the iinvestment realiisatiion on DJP Onliine. More iinformatiion on how to report the realiisatiion of reiinvestment can be read at thiis liink. The process iis completed. We hope the iinformatiion iis useful. (Vallen/Riig)