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Oct 14, 2010

Scholarship In Indonesian Income Tax

In the of the high cost of education while many people who can not afford to finance their education, scholarships are the best solution for student especially high academic achievement student to be able to complete their education. With the scholarship students who are economically unable to get help from other parties to finance their education. Well, in taxation view, assistance or donations in the form of scholarships is also an income for the recipient. On the other hand, the granting of scholarships from the giver, which usually is a company or foundation, is an expenditure. Expenditure is also closely related to taxation in the context of whether this expenditure can be expensed or not. Well, this simple article will illustrate how the tax treatment of these scholarship either for the giver or the student as recipient.


Scholarship : Income Tax Object or Not?

Although it meets the definition of scholarship income referred to in Article 4 paragraph (1) of the Income Tax Act, but we need to look at the types of exempt income as subject to Article 4 paragraph (3) of the Income Tax Act. Well, in Article 4 paragraph (3) letter l Income Tax Act states that the scholarships that meet certain requirements are not subject to tax. Meanwhile, further provisions as well as what requirements must be met stipulated in the Minister of Finance.

Regulation of the Minister of Finance that regulates this matter is the Minister of Finance Regulation No. 246/PMK.03/2008 as amended by Regulation of the Minister of Finance Number 154/PMK.03/2009. Under this rule, the scope of scholarship that does not include tax objects are:

  1. scholarship received by an Indonesian citizen from giver Taxpayer
  2. within the framework of formal education and or non-formal education
  3. performed in the country and / or abroad
  4. scholarship recipient does not have a special relationship with the owners, commissioners, directors or management of taxpayer scholarship givers.

The definition of formal education is a structured education course and tiered consisting of primary, secondary education and higher education. While non-formal education is the path of education outside the formal education that can be implemented in a structured and tiered.

To test the existence of a special relationship, we must look at the provisions in Article 18 paragraph (4) of the Income Tax Act. Under this provision a special relationship is considered to exist when there is a good family relationship by blood or marriage within the lineage of straight and / or to the side of one degree. These people are a parent, biological child, brother, sister, brother-in-law, sister in law, in-laws and stepchildren.
The scholarship component consists of tuition fees paid to the school (tuition fee), examination fees, research costs related to field of study is taken, the cost for the purchase of books, and / or cost of living is reasonable in their place of study area location.


Scholarship : Deductible or Non Deductible Expense?

From the point of giving scholarships, this expenditure is the cost. Well, of course, is the point of the Income Tax expenditures can be deducted (deductible) or could not be. Referral of this matter is Article 6 paragraph (1) of the Income Tax Act governing the costs can be deducted and Article 9 paragraph (1) of the Income Tax Act which regulates the costs or expenditures that can not be deducted.

Under Article 6 paragraph (1) letter g Income Tax Act, the cost of scholarships, apprenticeships and training are costs that can be deducted. Scholarships are not restricted scholarships to employees or prospective employees but also includes scholarships to non employees such as students with respect to fairness.

This provision is a kind of incentive to companies who want to provide scholarships so that they can support government programs to improve the quality of human resources through education.


Conclusion

From the above description can be concluded that the income in the form of scholarship in general was not subject to income tax. For Giver Taxpayer, scholarship expenditures can be deducted from gross income. Thus, the tax treatment of these scholarships taxable deviate from the principle of taxable deductibel..

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