Petitioner Zulferinanda, during a judicial review of Article 4 paragraph (3) letter f point 1 letter (a) of Law Number 7 of 1983 on Income Tax as lastly amended by Law Number 7 of 2021 on Harmonization of Tax Regulation (HPP Law), Wednesday (6/11). Photo by MKRI/Bayu.

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Jakarta, MKRI—The Constitutional Court once again held a judicial review hearing on Article 4 paragraph (3) letter f point 1 letter (a) of Law Number 7 of 1983 on Income Tax, as lastly amended by Law Number 7 of 2021 on Harmonization of Tax Regulation (HPP Law) on Wednesday, November 6, 2024 at the Panel Courtroom. The petition for Case Number 149/PUU-XXII/2024 was filed by Zulferinanda, an employee.

In the hearing, Justice Arsul Sani, as a chair, confirmed the petitioner’s letter dated October 31, 2024, on the withdrawal or retrieval of the petition. “So, this is according to the procedural law, we need to confirm whether it is true that you have sent the letter to withdraw or retrieve the petition,” Justice Arsul said.

Responding to that, Zulferinanda stated that it was true regarding the petition's withdrawal. Therefore, Justice Arsul continued, the Court would issue a decree on the withdrawal.

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Taxpayer Questions Income Tax on Domestic Qualified Dividends

Article 4 paragraph (3) letter f point 1 letter (a) of the HPP Law 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”, is deemed contradicting the 1945 Constitution of the Republic of Indonesia.

The petitioner argued that the new norms state 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.

Author: Utami Argawati
Editor: Lulu Anjarsari P.
PR: Fauzan Febriyan

Translator: Rizky Kurnia Chaesario

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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