`Zakat' to be deductible from net income tax

`Zakat' to be deductible from net income tax

The Jakarta Post, Jakarta

The Directorate General of Tax confirmed on Friday that zakat, or
the religious tax that Muslims are obliged to pay, will become
net income tax deductible starting next year.

"In determining the size of taxable income, zakat on income
(as against wealth/property) will be deductible from net income,
rather than from income tax owed," said Moch. Soebakir, acting
director of the tax information office.

The new policy on tax deductions applies to both individual
and corporate income taxpayers, he said in a letter distributed
to the media.

Muslims are obliged to pay at least 2.5 percent of their
income and wealth in zakat, in addition to giving alms and other
forms of social contribution.

To date, many Muslims who pay state income taxes -- ranging
from 5 percent to 30 percent -- have also paid the 2.5 percent
zakat either to government-appointed bodies, mosques, orphanages
or directly to the poor, without claiming rebates.

A 1999 law on zakat management, passed during the last days of
president B.J. Habibie's administration, however, makes it
possible for Muslim individuals and corporations to deduct the
amount of zakat they have paid from their net taxable income.

The policy comes into force in January.

While the law states that zakat is obligatory for Muslims, it
fell short of stipulating its enforcement, stating that the
matter is to be left to each individual to assess the amount of
zakat they want to pay and to whom.

President Megawati Soekarnoputri is scheduled to inaugurate a
new zakat management agency on Monday, which will become a parent
organization for provincial, regency and district agencies that
collect and channel zakat.

The 1999 law states that the national agency must report to
the House of Representatives while the regional offices must
periodically report to the local legislative councils.