Zulferinanda, an employee, challenging Article 4 paragraph (3) letter f point 1 letter (a) of the HPP Law, Thursday (10/3/2024). Photo by MKRI/Zahra.

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JAKARTA (MKRI) — Zulferinanda, an employee, is challenging Article 4 paragraph (3) letter f point 1 letter (a) of Law No. 7 of 1983 on Income Tax as lastly amended by Law No. 7 of 2021 on the Harmonization of Taxation Regulations (HPP Law). The preliminary hearing for case No. 149/PUU-XXII/2024 took place in the panel courtroom on Thursday, October 24, 2024.

The a quo article reads, “Exceptions for tax object shall be: f. dividends or other incomes with the following requirements: 1. Domestic dividends received or obtained by: a) domestic individual taxpayers provided that the dividends be invested in the territory of the Unitary State of the Republic of Indonesia within a certain period of time; and/or b) domestic corporate taxpayers.”

The Petitioner argued that the newly-amended provision is in violation of Article 28D paragraph (1) of the 1945 Constitution because it states that domestic dividends received by domestic individual taxpayers are not subject to income tax (PPh) provided that they are invested domestically within a certain period of at least three tax years, starting from the tax year they are received or obtained. This provision is contained in Article 36 paragraph (2) of the Minister of Finance Regulation No. 18 of 2021, a derivative of the HPP Law.

In other words, dividends in the form of savings or deposits kept domestically for three years are not subject to income tax. Therefore, the Petitioner considers it unfair that income in the form of salary, incentive, or bonus earned by employees to meet their daily needs is subjected to income tax, while dividends received by entrepreneurs who invest excess company funds in shares are not.

“Therefore, establishing that domestic dividends received by individual taxpayers as one of the non-objects of income tax with certain conditions is a decision that is contrary to Article 28D paragraph (1) of the 1945 Constitution of the Republic of Indonesia and can even lead to injustice and preferential treatment for individual taxpaying entrepreneurs compared to other individual taxpayers such as employees. As such, it is necessary to abolish the norm,” the Petitioner said before Constitutional Justices Arsul Sani (panel chair), Anwar Usman, and Daniel Yusmic P. Foekh. 

Justices’ Advice

Justice Foekh highlighted the Petitioner’s argument of his legal standing and constitutional impairment relating to tax, to prove himself a taxpayer. Tax identification number (NPWP) can be a proof of income tax payment and dividends.

“The Petitioner should connect the reviewed article and the touchstone in the Constitution so that the impairment is obvious and can convince the justices. The Petitioner may also include theories, principles, doctrines, or comparison to other countries, so that the injustice of the norm being petitioned is reflected,” he added.

Meanwhile, Justice Anwar asked the Petitioner to pay attention to the petitum. Next, Justice Arsul added that the Petitioner need to review past petitions and decisions relating to the current petition.

“So that the petition be better. The Petitioner may also make an argument on his constitutional impairment with a firmer and clearer elaboration as he compares taxpayers whose income are taxed and those whose dividends are taxed and not taxed,” he said.

At the end of the session, Justice Arsul announced that the Petitioner would have 14 days to revise the petition and submit it by Wednesday, November 6 to the Registrar’s Office. The Court will then schedule a second hearing to examine the revisions to the petition.

Author            : Sri Pujianti
Editor             : Lulu Anjarsari P.
PR                 : Raisa Ayuditha Marsaulina
Translator       : Yuniar Widiastuti (NL)

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

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