INFRASTRUCTURE AND EDUCATION FOUNDATION BUILDING CONSTRUCTION FUND HANDLED BY TAX CONSULTANT IN BALI

By:   Adv. Ida Bagus Made Utama, S.E., S.H., M.H, BKP., CPCLE

         Tax Consultant in Bali

 

 

Additional knowledge for tax consultants, especially tax consultants in Bali about Educational Foundations in Bali particularly. Foundations or similar organizations engaged in formal education ranging from kindergartens to universities can recognize funds for the construction of educational buildings and infrastructure originating from the remainder, which is the difference from all revenues that are the object of Income Tax other than income subject to separate Income Tax reduced by expenses for the daily operational costs of the foundation as income in the tax year it is used, and the amount of funds that have been used is an expense that can be deducted from gross income in the tax year concerned.

Regarding the funds of building construction and educational infrastructure, it will be used for the buildings construction and educational infrastructure that come from the remaining amount, which is the difference from all revenues that are the object of Income Tax other than income subject to separate Income Tax, minus the expenses for the daily operational costs of the foundation.

Explanation of the above matters that buildings construction and educational infrastructure are the physical construction of educational facilities such as:

1) land purchase for the construction of educational infrastructure,

2) educational building,

3) student dormitories,

4) official residences for teachers, lecturers, or employees,

5) laboratory equipment, libraries including books,

6) sports facilities,

7) office inventory.

The implementation of these provisions is carried out as follows:

• The remaining surplus of the foundation each year that will be used for the construction of buildings and educational infrastructure is transferred to the building and educational infrastructure development fund account;
• Recording or accounting on usage of funds for the building’s construction and educational infrastructure in the current year is done by debiting the asset account and the fund account for the buildings construction and educational infrastructure and crediting the cash or debt account and the foundation’s capital account.

The manager or management of the foundation is obliged to notify the simple physical plan and cost plan of the buildings construction and educational infrastructure to the Head of the local Tax Office with an extension to the Director General of Tertiary Education and/or the Director General of Primary and Secondary Education or their designees, and attached with a statement.

Funds for the buildings construction and educational infrastructure must be used for the buildings construction and educational infrastructure within a period of 4 (four) years after the end of the tax year in which the funds are received.

If the buildings construction and educational infrastructure is financed with loan funds, then the interest on the loan can be charged as a foundation cost that can reduce the income.

If after a period of 4 (four) years after the end of the tax year the fund is received. The foundation does not use the funds for the buildings construction and educational infrastructure, then the funds for the buildings construction and educational infrastructure are recognized as income and subject to Income Tax in the following tax year after the lapse of the 4 (four) year period.

If after the lapse of the period is not used, the imposition of Income Tax on unused education building and infrastructure development funds after the lapse of the above period is added with sanctions in accordance with applicable tax provisions.

In relation to the expenditure for the buildings construction and educational infrastructure which come from the educational buildings and infrastructure development fund as referred to above, depreciation is not allowed  based on the Income Tax Law.

Tax Consultant in Bali has a thorough understanding of Bookkeeping and Tax Return.

Foundations or similar organizations that establish funds for the buildings construction and educational infrastructure are required to make the following points:

1. A separate record of the education building and infrastructure development fund received and used each year;
2. A statement that the funds for the buildings construction and educational infrastructure that are not used in the year of receipt will be used for the construction of educational buildings and infrastructure no later than 4 (four) years after the end of the relevant tax year.
3. Report on the provision and usage of funds for the construction of educational buildings and infrastructure and submit it to the Head of the local Tax Office as an attachment to the Annual Income Tax Return (SPT).

VALUE ADDED TAX

If the operation of the Foundation does not deliver goods or services that are subject to VAT then the foundation does not include the criteria for VAT subjects so it does not need to be confirmed as a taxable entrepreneur (PKP). On the contrary, if the Foundation performs the delivery of goods or services that are payable to VAT, it must register as a taxable entrepreneur (PKP) if its turnover is more than Rp 4,800,000,000, – a year and the provisions stipulated in the VAT Law and its implementing regulations.

 

The author is a Tax Consultant in Bali Registered at the Directorate General of Taxes, Managing Partner at IBU Consulting Denpasar and Lawyer at World Prime Law Firm and lecturer at several leading universities in Bali.