The disassembled parts of a smuggled Harley Davidson Shovelhead are shown
by customs officials in Jakarta on Thursday. (B1 TV Photo)
The Taxation Oversight Committee has uncovered 12 loopholes in the taxation system that can be exploited by corrupt officials and taxpayers, chairman Anwar Suprijadi told legislators in a hearing T
The Indonesian Chamber of Commerce and Industry (Kadin) urges the government to separate the tax office from tax regulatory authorities and to examine tax complaints so as to improve the country’
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said Sunday he did not support a Facebook group that was pushing for a boycott of tax payments in a protest against recent corrupti
The Directorate General of Taxation is seeking the dismissal of tax officer Gayus Tambunan for his alleged involvement in a corruption case involving Rp 25 billion (US$2.75 million) of funds.
Finance Minister Sri Mulyani Indrawati on Friday inaugurated new members of the Taxation Supervisory Committee, with former customs and excise director general Anwar Suprijadi appointed chairman.read more
Thursday March 25, 2010
Investment income – is it taxable?
By PAULINE TAM
IT IS the time of the year when some of us may feel uneasy as the deadline for filing our personal income tax return gets nearer. You may drag your feet when having to complete the return form (Form B or Form BE as the case may be) and procrastinate till the last minute as obviously paying taxes is not as exciting as receiving money from your investments.
After having received money from your investments in say, shares and property, have you considered whether the receipts are taxable?
In general, people are under the impression that dividend income is not required to be reported in the tax return. This is only true provided the dividend income is tax exempt as in the case where the dividend that is received is either a single tier dividend or is paid out of the exempt profits of the dividend-paying company. In the case where you received dividends where income tax has been deducted at source, such dividend income is taxable and consequently has to be declared in your income tax return.
Depending on your level of taxable income, you may actually obtain a tax refund from the Inland Revenue Board (IRB) if your tax bracket is at 24% or below.
Generally, the tax deducted by the company on the taxable dividend is at the rate of 25%. On the other hand, if your tax bracket is at 27%, then you are required to pay the 2% differential to the IRB.
In order to determine whether your dividend income is taxable or otherwise, you can look at the dividend vouchers. However, one common mistake in the reporting of taxable dividend income is where the actual amount received is declared as opposed to the gross dividend income, as stated in the dividend voucher.
The other common investment income is rental income. Reporting of rental income would be simple if only the gross rental received without claiming deduction for expenses incurred in deriving the rental income was reported. As a smart investor with diversified investments, every penny saved or earned would be additional funding for your next investment.
Therefore, you should claim all the permissible expenses against the gross rental income. The permissible expenses would include assessment, quit rent, service charges, sinking fund contributions, fire insurance and property loan interest. In the case of a bank loan taken to finance a property which generated rental income, one has to remember that it is only the loan interest that is deductible and not the entire loan repayment amount.
Other rental-related expenses such as property agent’s commission and repairs may be deductible against the rental income. However, you would need to scrutinise such expenses in detail to establish if they are indeed deductible.
In the case of the property agent’s commission, where the property owned is being rented out for the first time, the commission paid for securing the first tenant would not qualify for a tax deduction. Subsequent commission paid to the property agent for securing tenants for the same property (after the first tenancy) would be deductible. Likewise, not all repair expenses incurred on the property could be deducted against the rental income.
If you were to repair a leaking roof and install a canopy at the verandah of the house at the request of the tenant, the expense incurred on the canopy would not be deductible as it would not be regarded as repairs and maintenance expense although the repair of the roof should qualify for a deduction.
Some points to take note of
Bearing in mind the penalty that can be imposed by the IRB in the event of an understatement of income in the tax return, you would have to be careful when determining the types of expenses to claim against your investment income. It is important that you do not make a claim for otherwise eligible expenses if you do not have the supporting documents to justify your claims.
If you have a property jointly owned with your spouse, the rental income will be taxed based on your share in the property. Correspondingly, your spouse would have to report the rental income based on his or her share in the property.
Where you and your spouse have investment income, you may be thinking of whether you should be filing for separate assessments or opting for a combined assessment. For most couples, a combined assessment is not beneficial as the combined income would push the tax rate to a higher bracket.
Further, a separate assessment would allow each person to claim the personal relief of RM8,000 whereas a combined assessment would only allow the person to claim either a wife or husband relief of RM3,000 in addition to the personal relief of RM8,000.
This would mean a loss of relief of RM5,000.
·Pauline Tam is executive director, KPMG Tax Services Sdn Bhd
President Susilo Bambang Yudhoyono and Vice President Boediono are set to submit their tax return for the 2009 tax year at the head office of the Directorate General of Taxation on Wednesday.
Government to speed up reform of overseas tax
Businesses may have to rethink their overseas expansion plans after the Treasury signalled it would accelerate plans to reform the way that it taxes the profits earned by companies’ foreign branches.
Taxation revenues are estimated to drop Rp 9.5 trillion (US$1.03 billion) to Rp 733.24 trillion this year, according to the proposed revised 2010 state budget.