The government allows mineral mining companies to take into account charitable contributions and social infrastructure costs as a reduction in gross income, as long as they meet the terms and conditions.
This policy is contained in the Minister of Finance Regulation (PMK) No.62/PMK.03/2021 concerning Procedures for Involvement of the Central Government and/or Local Government in the Framework of the Imposition of Charitable Contributions and/or Costs of Social Infrastructure Development that Can Be Deducted from the Gross Income of Taxpayers in the Field of Mineral Mining Business.
The types of charitable contributions emphasized in this regulation include:
- contributions in the context of national disaster management,
- contributions in the context of research and development,
- contributions of educational facilities,
- contributions in the context of sports development, and
- social infrastructure development costs related to the provision of public facilities and infrastructure, including in the health sector and are non-profit.
The cost component, which can be taken into account in determining the Taxable Income (PKP) of mineral mining companies, is the cost to obtain, collect, and maintain income in accordance with the provisions of Income Tax (PPh).
In this case, expenses in the form of charitable contributions or donations of money or goods that are included in the cost component are those whose distribution is channeled through related institutions involving the central or local government, in accordance with the Ministries/Agencies (K/L) program.
The involvement of the central government must be proven by an authorized approval document, which contains the following information:
- number and date of the approval document;
- name, address, and Tax ID Number of the donation collection organizer;
- plan and explanation of donation distribution programs are in accordance with the provisions of the laws and regulations; and
- plan for the nominal amount of donations distributed by the donation collection organizer in accordance with government programs and the approval of officials.
The authorized official's approval documents must include the following:
- conformity of the collection organizer's donation distribution program with the policy program of the central government or local government;
- the responsibility for implementing the program is the responsibility of the donation collection organizer; and
- the time period for the implementation of the donation distribution program is signed by the authorized central government or local government official.
Terms and Conditions
Contributions that can be deducted from gross income must meet the following conditions:
- the taxpayer does not experience a fiscal loss based on the Annual Income Tax Return of the previous tax year;
- the provision of donations or assistance does not cause losses in the current tax year;
- supported by valid evidence;
- provided through disaster management agencies or institutions that have obtained permission from authorized agencies/ institutions or donation collection organizers involving the central or local government and have Tax ID Number; and
- donations or contributions are not submitted through a donation collection organizer that has a special relationship.
Meanwhile, for the cost of social infrastructure development that can be a reduction in gross income must meet the following conditions:
- the taxpayer does not experience fiscal loss based on the annual income tax return of the previous fiscal year;
- the donation or expense does not cause a loss in the Tax Year when the donation is given; and
- supported by proof of receipt of valid donations from the central or local governments.
Then, taxpayers who donate are required to report proof of receipt of donations to the Director General of Taxes, at the latest along with the submission of the annual tax return.
Reporting is done by filling out a donation receipt form, which at least contains the name, address, and Tax ID Number of the donation collection organizer and the related taxpayer, date of donation, number of receipt of donation from the donation collection organizer, a form of donation, and value of the donation.
In addition, the Taxpayer must also submit a copy of the approval document electronically through another website or channel that is integrated with the system of the Directorate General of Taxes.
Donations collection organizers are also required to submit reports to the Director General of Taxes.
The provision of reporting receipt of donations is effective on 1 January 2022.