SPORTS, SUBJECT TO AMUSEMENT TAX
Local governments have intensified efforts to increase Regional Own-Source Revenue (“PAD”). One such measure is targeting the sports sector. Certain sports facilities and activities are subject to a sports tax. This policy has drawn criticism amid public efforts to pursue a healthy lifestyle through sports.
Definition of Sports Tax
Pursuant to Article 1 of Law No. 28 of 2007 concerning the Third Amendment to Law No. 6 of 1983 regarding General Provisions and Tax Procedures (“Law 28/2007”), a tax is a compulsory exaction imposed upon an individual or entity by the State under statutory authority, without direct consideration, for the benefit of the State to promote the general welfare of the people.
A sports tax refers to a levy imposed upon sports activities of an amusement or recreational nature, conducted on a commercial basis, and collected by the event organizer.
Sports tax is classified as a Tax on Certain Goods and Services (“PBJT”) levied by regency/municipal governments, as stipulated in Article 55 paragraph (1) letter (i) of Law No. 1 of 2022 concerning Fiscal Relations between the Central Government and Local Governments (“Law 1/2022”).
Accordingly, sports activities are not subject to Value-Added Tax (VAT), as the tax is not collected by the central government but rather by local governments.
Criteria for Imposition of Sports Tax:
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- Conducted for amusement or recreational purposes;
- Charges fees to spectators and/or service users;
- Operated on a commercial basis.
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Sports Tax Rate
Article 58 of Law 1/2022 provides that the maximum rate for PBJT is ten percent (10%). Local governments may set applicable PBJT rates within their jurisdiction through regional regulations. For example, the Jakarta Capital Special Region Government has set the sports tax rate at ten percent (10%) pursuant to Regional Regulation No. 1 of 2024 on Regional Taxes and Regional Levies (“Jakarta Regional Regulation 1/2024”).
Under Article 59 of Law 1/2022, the tax base for PBJT, as stipulated in Article 57, is multiplied by the rate determined to arrive at the amount of tax payable. PBJT is collected in the jurisdiction where the sale, delivery, or consumption of the specified goods or services occurs. The tax becomes due at the time of payment, delivery, or consumption.
In other words, the PBJT mechanism ensures that the tax is levied locally, according to the rate set by the relevant local government, and calculated based on the transaction value.
For instance, if an individual wishes to host a sports match in Jakarta, the applicable rule is set out in Jakarta Regional Regulation 1/2024. Article 53 paragraph (1) of that regulation prescribes a ten percent (10%) tax rate for sports events, meaning the total cost incurred for the sports event is multiplied by ten percent (10%) as an amusement (sports) tax.
Sports Tax in Jakarta as a Disincentive
The types of sports subject to amusement tax vary by jurisdiction. In Jakarta, twenty-one (21) sports disciplines are taxable, including padel, futsal in commercial rental venues, billiards in entertainment venues, paintball, trampolining, paid archery, rented table tennis and tennis courts, non-tournament badminton, bowling, paid running tracks, roller skating, indoor climbing, skateboarding in commercial arenas, rented climbing walls, recreational horseback riding, water play areas, rented ATV/motor trail activities, modern archery arenas, and golf simulators. Golf is excluded as it is classified as a competitive sport with regular membership systems.
Theoretically, the imposition of sports tax may serve as a disincentive to the sports industry. Business operators may be compelled to charge higher prices for sports facilities, thereby reducing public interest in engaging in sports and maintaining a healthy lifestyle.
Conclusion
Sports tax is a local levy on sports activities of an amusement and commercial nature, with a maximum rate of ten percent (10%) under Law No. 1 of 2022, the implementation and coverage of which are determined through each local government’s regulations.
Legal Basis:
- Law No. 28 of 2007 concerning the Third Amendment to Law No. 6 of 1983 on General Provisions and Tax Procedures;
- Law No. 1 of 2022 concerning Fiscal Relations between the Central Government and Local Governments;
- Jakarta Regional Regulation No. 1 of 2024 on Regional Taxes and Regional Levies.
Authors:
Yohana Maranatha, S.H.
Eva Rutnauli Sinaga
Editor:
Muhammad Arief Ramadhan, S.H.