Shares are assets that investors own. Stocks, like other tradable assets, are traded. Shares can indeed be sold in a market known as the capital market or stock exchange. However, these shares are not always traded on the stock exchange. An over-the-counter transaction is what this is. Over-the-counter transactions on debt securities and/or sukuk (EBUS) can be carried out by alternative market operators in accordance with the Financial Services Authority Regulation of the Republic of Indonesia (OJK) Number 8/POJK.04/2019. If EBUS is regulated in the OJK Regulation, stock securities are not, so over-the-counter share transactions take place directly between the owners of capital and the sellers of shares without the use of a market mechanism.
Due to the absence of a market mechanism, these transactions are frequently untaxed. Whereas the Income Tax Law explicitly specifies that income derived from the sale or transfer of property is considered taxable income (Article 4 paragraph 1 of the Income Tax Law)
Here are 7 things to know about taxes on capital gains in over-the-counter stock transactions. (See Minister of Finance Decree No. 343/KMK.04/1999)
- The Income Tax Law does not make any provision for the exclusion of profits made through the sale or transfer of shares from the income that is subject to taxation.
- The profits made from over-the-counter share transactions are subject to taxation in accordance with the provisions of Article 17 of the Income Tax Law if the beneficiary of the income derived from the sale or transfer of shares is a resident taxpayer. This is because the income is considered taxable income.
- An over-the-counter share transaction is subject to taxation in accordance with the provisions of Article 26 of the Income Tax Law if the recipient of the income derived from the sale or transfer of shares is a foreign taxpayer, provided that the taxation rights are in Indonesia in accordance with the Tax Treaty Agreement. This is the case even if the taxation rights are in a foreign country.
- Under Article 26 of Income Tax, domestic taxpayers have an obligation to make a deduction from the proceeds of the sale of any shares in the country that are obtained or received by foreign taxpayers.
- If both the buyer and the seller of shares are international taxpayers, domestic taxpayers whose shares have been sold are designated as withholding Income Tax under Article 26.
- The tax base for income from the sale of shares in the country that is gained or received by a foreign taxpayer is fixed at 25 percent of the selling price under Article 26 of the Income Tax.
- The taxpayer is required to make the payment of income tax Article 26 no later than the 10th of the month that follows the transaction to avoid incurring penalties for late payment of Income Tax Article 26 on over-the-counter share transactions.
Thus, the Taxpayer becomes aware of his obligations regarding the fulfillment of tax obligations originating from over-the-counter stock transactions. As a result, the Taxpayer is made aware of his responsibilities regarding the accomplishment of tax obligations arising from over-the-counter stock transactions.
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