This article is developed by considering that income in the form of lottery prizes is not acknowledged as remuneration for the works or services provided by Taxpayers, and since its acquisition does not require funds or effort as one does when receiving remuneration on works or services. Thus, income in the form of lottery prizes with any name or form is imposed with Final Income Tax.
Tax Subject
Article 4(2) Income Tax is imposed on both Individual and Corporate Taxpayers, Domestic and Foreign, who received or obtained income in the form of lottery prizes in any kind of name or appearance.
Tax Withholder
Article 4(2) Income Tax withholding is done by the lottery organizer. A lottery organizer is an individual, corporation, committee, organization (including international organizations), or other type of organizer including entrepreneurs selling goods or services and providing gifts by conducting a lottery.
Tax Object
Article 4(2) Income Tax is imposed on lottery prizes as income, which are paid to individuals or corporations. A lottery prize is a reward with any kind of name or appearance given through a lottery or raffle.
Not included as lottery prizes are direct rewards in products or services selling as long as it is given to all consumers without lottery or raffle, and the reward is directly received by consumers by the end of goods or services purchase.
Tax Basis
The basis imposition of Article 4(2) Income Tax is the prize value. The definition of prize value is the face value or market value if the prize is in natura form.
Tax Rate
Lottery prizes are imposed with Final Income Tax at a rate of 25% of the gross value of the lottery prize.
Tax Due Date
Article 4(2) Income Tax imposed on lottery prizes is due when the reward is given.
Withholding Tax Procedure
Article 4(2) Income Tax is withheld by the lottery organizer. A lottery organizer is an individual, corporation, committee, organization (including international organizations), or other type of organizer including entrepreneurs selling goods or services and providing gifts by conducting a lottery.
Tax Payment Procedure
Income Tax Withholders must pay the Income Tax to the Tax Office or banks appointed by the Ministry of Finance, no later than the 10th (tenth) day of the following month after the month the tax withholding is made.
The payment is made using a Tax Payment Slip with the tax account code 411128 for Article 4(2) Income Tax and the payment code 405 is for Lottery Prizes.
If the tax payment due date coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the payment can be made on the next working day.
Tax Filing Procedure
Withholders of Article 4(2) Income Tax must report the withheld income tax on the Unification Income Tax Returns no later than the 20th (twentieth) day after the tax period ends.
If the filing due date of the Article 4(2) Final Income Tax return coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the filing can be made on the next working day.
Individuals who receive lottery prizes withheld with Article 4(2) Income Tax are obligated to file their income in the form of lottery prizes and the withheld Article 4(2) Income Tax on their Individual Annual Income Tax Returns by 3 (three) months after the end of the Tax Year.
Example Calculation of Article 4(2) Income Tax on Lottery Prizes
Illustration 1
PT ABC conducts a lottery on coupons submitted by their costumes with a prize of IDR100,000,000. During its raffle, Ms. Erika’s name came out as the receiver of the lottery prizes.
The calculation for Article 4(2) Income Tax that must be withheld by PT ABC on lottery prize received by Ms. Erica is as follows:
Article 4(2) Income Tax = Rate x Lottery Prize Gross Amount
Article 4(2) Income Tax = 25% x IDR100,000,000
Article 4(2) Income Tax = IDR25000,000
Illustration 2
PT Bank Care Indonesia is providing rewards for its clientele who are saving money in its bank. All clientele will be given a novel made by a famous Indonesian author with a market value of IDR200,000.
The novel is then considered as a reward in the form of natura, which is given to all end consumers without a raffle and is received by said consumers during the time of buying the service, which is during the opening of a new bank account. Thus, said reward in the form of a novel is accounted as income and must be filed in the clientele’s Annual Income Tax Returns with its market value.
Legal Basis:
Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 7 Year 2021 regarding Harmonization of Tax Regulations
The Government Regulations Number 132 Year 2000 regarding Income Tax on Lottery Prizes
The Minister of Finance Decree Number 639/KMK.04/1994 regarding Procedures of Income Tax Withholding, Payment, and Filing on Lottery Prizes
The Directorate General of Taxes Regulation Number PER-11/PJ/2015 regarding Income Tax Imposition on Prizes and Awards
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