Tax Clinic
Understanding Environmental Organization Tax in Sherina's Adventure Movie 2

Tuesday, 17 October 2023

Understanding Environmental Organization Tax in Sherina's Adventure Movie 2

It has been 23 years, since the first sequel was released in 2000, finally Sherina and Sadam are back in The Adventures of Sherina 2. A movie that is quite memorable for the 90s generation.

Sherina's character who is funny and good at singing and Sadam who is ignorant and mama's boy, are very attached to our memory. But this time we will not discuss the storyline of the musical drama film made by Producer Mira Lesmana.

We will talk about the tax aspects of organizations incorporated as a Foundation, especially non-profit organizations in the field of environmental protection, such as OUKAL, where Sadam worked as an environmental activist.

OUKAL is short for Orang Utan Kalimantan. As the name suggests, this organization has a vision to save the endangered Orang Utan species in Kalimantan, Indonesia.

The existence of OUKAL in Petualangan Sherina 2 was adapted from a real organization that exists in real life, the Borneo Orang Utan Survival Foundation (BOSF).

Do Non-Profit Organizations Pay Taxes?

Some may wonder, are non-profit organizations, true to their name, exempt from taxes due to their non-profit orientation?

First, we must understand that most social organizations like BOSF are in the form of a Foundation. In our tax provisions, the Foundation is included in the definition of Entity. But, it only becomes a taxpayer if it receives or obtains income which is a tax object.

Two types of Foundation income are subject to Income Tax. First, income from business activities, as stipulated in Article 4 paragraph (1) of the Income Tax Law. Second, income from building land leases, interest on deposits, savings, current accounts, and other income that is the object of Final Income Tax.

Meanwhile, income that is not subject to Income Tax includes, first, grants, assistance or donations received related to environmental conservation activities. As long as it is not related to business, work, ownership, or control between the parties concerned.

Second, dividends received or obtained by the Foundation from equity participation in a business entity domiciled in Indonesia.

So, it can be concluded that not all income or flow of funds in the Foundation's account will be taxed.

However, the Foundation is obliged to withhold income tax when making payments for services that are tax objects to other parties. For example, as a withholder of Income Tax Article (ITA) 21 on income in the form of salary, honorarium, wages, benefits paid to employees/activity participants / other parties.

Remaining Excess Difference

Although not profit-oriented, it does not rule out the possibility of the Foundation recording the excess difference between the income received against the costs of obtaining, collecting, and maintaining the income and placed as an endowment fund.

The excess difference is exempted from the object of Income Tax, provided that at least 25% of the amount is used to build or procure social or religious facilities and infrastructure.

The construction or procurement of facilities and infrastructure as well as the allocation in the form of an endowment fund is carried out within a maximum period of four years from the time the excess difference is received or obtained.

General Tax Provisions

Not only related to income tax, several general tax provisions must be fulfilled by the Foundation. First, register with your domicile Tax Office to get a Tax ID number.

Second, report the business to be confirmed as a VAT-Registered Person (PKP). Please note that the transfer of taxable goods or services with a revenue of more than 4.8 billion a year.

Third, maintain bookkeeping according to applicable accounting standards. Fourth, it is mandatory to submit Annual Tax Returns and Periodic Income Tax Returns following applicable tax regulations.

Then fifthly, foundations are exempted from the obligation to pay land and building tax for tax objects that are used for public purposes in the fields of worship, social, health, education, and national culture, and that are not intended to make a profit. (ASP/KEN)


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