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Income tax is imposed to an individual or individuals and entities with regard to their income received or accrued during the tax year.

Subject to Tax e.g.:

a. 1) Individual;

2) Undivided inheritance as a single unit in lieu of the right of the heirs: Undivided inheritance as a   single unit is subject to the substitute tax, to replace the heirs. The purpose of the appointment of an undivided estate as subject to the substitute tax is to impose tax on the income derived from such heritage can still be implemented.

b. Entity

Based on the Law regarding the General Provision and Procedure of Taxation, the meaning of Entity is number of people and/or capital that is united both conduct business activities and not conduct business activities consists of the Limited Liability Company, CV, other forms, the State Owned Company or the Regional State Owned Company, Firm. Cooperatives, pension, association, yayasan, NGOs, social politics organizations or similar organization etc.

Under this law, the Permanent Establishment (PE) is categorized as a subject to tax, separated from Entity. Therefore, although the PE is deemed as a Subject to tax, for Income Tax, PE still has its own existence and not categorized as an Entity.

The State Owned Company and Regional (BUMN/D) is subject to tax regardless its name & form, therefore each unit from the Government such as Institution, Unit and etc that owned by the Central/Regional Government that conducts business or conducts activities in order to obtain income is subject to Tax.

The certain unit of the Government body that fulfill the criteria as a non-tax subject amongst others:

1. Established based on the prevailing laws & regulations;
2. Get fund from the State/Regional Budget (APBN/APBD);
3. The Income of the said institution included in the State/Regional Budget.
4. The bookkeeping is checked by the state functional supervisors

As subject to tax, the mutual funds both in the form of the Limited Liability Company and other forms included in the Entity category.

c. Permanent Establishment

The Permanent Establishment is a type of business that used by the individual that is not resided in Indonesia or present in Indonesia not more than 183 days within 12 months, or the entity that is established and is not domiciled in Indonesia, to conduct business or activities in Indonesia, that may include: the seat of management, branches, representative offices, mining and quarrying of natural resources, drilling work area used for mining exploration.