The Indonesian government, through the Ministry of Finance (“MOF”), is finalizing a new regulation to update and clarify the tax treatment of zakat, religious donations and gifts (hibah) (“Draft MOF Reg.”). The Draft MOF Reg. is currently undergoing final harmonization with the Directorate General of Legislation at the Ministry of Law. Once enacted, it will replace the existing provisions under MOF Regulation No. 254/PMK.03/2010 and MOF Regulation No. 76/PMK.03/2011.
This new Draft MOF Reg. aims to align the tax treatment of zakat, religious donations and gifts (hibah) within the framework set out in the Income Tax Law and Government Regulation No. 55 of 2022 regarding the Adjustment of Taxation Provisions.
Key Features of the Draft Regulation
The Draft MOF Reg. maintains the general tax principle that zakat, religious donations and gifts (hibah) are non-deductible expenses for income tax purposes. However, it also reaffirms and refines certain exceptions on deductions and non-taxability to promote social welfare and improve compliance clarity.
1. Deductible Contributions
Under the Draft MOF Reg., certain non–religious donations will continue to be deductible from gross income, provided they are made for specific purposes as previously outlined in Government Regulation No. 93 of 2010, namely:
- National disaster relief efforts;
- Research and development activities;
- Educational facilities;
- Sports development; and
- Social infrastructure construction.
To qualify for deductions, each contribution must be supported by proper documentation, including official receipts issued by eligible recipient institutions and evidence (i) that the donation was not made to related parties and (ii) it was not made in exchange for any direct or indirect benefit to the donor.
2. Zakat and Religious Donations
Consistent with Article 4(3)(a) of the Income Tax Law, zakat paid to recognized zakat-collecting institutions (amil zakat), and religious contributions made by non-Muslim taxpayers to officially designated religious organizations recognized by the government, will continue to be deductible from the donor’s gross income and non-taxable to the recipient.
This provision aims to encourage taxpayers to fulfil their religious and social obligations through regulated and accountable channels, ensuring accountability and transparency in the collection and distribution of funds. Eligible institutions are determined in coordination with the Ministry of Religious Affairs and the National Amil Zakat Agency (BAZNAS).
3. Gifts (Hibah)
The new regulation further clarifies that gifts (hibah) received by individuals or organizations are not considered as taxable income under Article 4(3)(a) of the Income Tax Law, provided that the gift is not connected to any employment, business or ownership relationship between the donor and recipient. This clarification is intended to prevent the misuse of “donations” as disguised payments or compensation for services rendered.
Administrative Compliance and Documentation
Taxpayers claiming deductions for zakat or other qualifying donations must retain supporting documents as evidence for tax audit purposes. This includes:
- Proof of payment to a government-approved institution;
- A receipt identifying the donor, recipient and the purpose of donation; and
- For zakat, an acknowledgment or certificate issued by an authorized amil zakat institution registered with BAZNAS or the Ministry of Religious Affairs.
For taxpayers undergoing liquidation or restructuring, contributions made as part of corporate social responsibility or community obligations must also be reported in accordance with the General Tax Provisions and Procedures Law (Law No. 6 of 1983, as amended).
Implications for Taxpayers
Businesses and individuals are encouraged to monitor the finalization of this new regulation to anticipate changes in tax deductibility and documentation requirements. Pending its enactment, taxpayers should review their existing zakat and donation policies to ensure contributions are made through government-approved institutions to qualify for deductions. Companies are also encouraged to maintain comprehensive records of all donations detailing their type, purpose, amount and recipient to support compliance and verification during tax audits.
This reform underscores the government’s commitment to align fiscal policy with social responsibility, providing greater clarity on the tax treatment of zakat and social donations, while ensuring against misuse of the system for tax avoidance purposes. (30 October 2025)
