| dc.description.abstract | In corporate consolidation, there is a transfer of assets and liabilities from the old company to the newly consolidated entity, including rights to land and/or buildings. The transfer of these rights is subject to Final Income Tax on Land and Building Transfer (PPh Final PHTB) for companies transferring the rights and Acquisition of Land and Building Rights Duty (BPHTB) for companies releasing the rights. There are two accounting methods used in consolidation: the by purchase method and the pooling of interest method. The by purchase method records the transfer of land and/or building rights based on market value, resulting in the creation of goodwill. On the other hand, the pooling of interest method records the transfer based on book value. Under the pooling of interest method, companies transferring land rights are not subject to PPh Final PHTB, according to Article 6 letter e of Government Regulation Number 34 of 2016 on Income Tax from Transfer of Land and/or Building Rights and Sale and Purchase Agreement of Land and/or Buildings and its amendments.
This study adopts a descriptive nature with a normative juridical research type, aiming to provide recommendations on addressing specific issues that can generate arguments, theories, or new concepts as prescriptions to resolve the problems at hand. The prescriptive nature of this study is utilized to analyze the imposition of income tax on the transfer of land and/or building rights in business mergers or consolidations.
Fundamentally, the imposition of PPh Final PHTB in consolidation is based on market value. However, Article 6 letter e of Government Regulation No. 34 of 2016 allows for the use of book value in consolidation, or in other words, using the pooling of interest method, thereby exempting companies from PPh Final PHTB when using book value in consolidation. Companies intending to consolidate may apply for the use of book value in consolidation in accordance with Regulation No. S6/PMK.010/2021, which amends Regulation No. 52/PMK.010/2017 on the Use of Book Value for the Transfer and Acquisition of Assets in the Context of Mergers, Consolidations, Expansions, or Business Acquisitions.
The imposition of PPh Final PHTB in consolidation does not meet the principles of horizontal and vertical equity. Under the by purchase method in consolidation, PPh Final PHTB is levied on companies transferring land and/or building rights, while BPHTB is imposed on companies receiving the transfer. In contrast, under the pooling of interest method, only BPHTB is imposed on companies receiving the transfer of land and/or building rights. It is recommended that the government revise regulations allowing the use of the pooling of interest method in consolidation to better meet principles of horizontal equity. | en_US |
