DGT Regulation No. PER-11/PJ/2015 dated March 3, 2015

INCOME TAX IMPOSEMENT ON PRIZE AND REWARD

Income derived from prize from lottery, competition also activity and reward are object for income tax.

Lottery organizer will withhold final income tax article 4 paragraph 2 amounting to 25% from lottery prize.

Prize or reward on competition, prize on activity and reward are subject to income tax as follow:

1.    When beneficiary is local individual taxpayer, it is subject to withholding income tax law article 21 with tariff based on income tax law article 17.

2.    When beneficiary is foreign taxpayer other than permanent establishment, it is subject to withholding income tax law article 26 amounting to 20% from gross income or avoidance of double taxation agreement.

3.    When beneficiary is corporate taxpayer including permanent establishment, it is subject to withholding income tax law article 23 paragraph 1 letter a number 4 amounting to 15% from gross income.

Exception from the above mentioned withholding tax are direct prize in selling of goods or services as long as it is given to all buyer or end consumer without any drawing and such prize is given directly to end consumer at the time of purchase. Such prize is object to income tax which must be reported in annual tax return.

At the effective date of this regulation, DGT Regulation No. KEP-395/PJ/2001 concerning income tax enforcement on prize and reward will no longer valid.

This regulation will be effective on 1 May 2015.