Deductible and Non
Deductible Expense
Article 6 and Article 9
Law No 7/2021 (Taxation Regulation Harmonization)
Article 6 Paragraph 1
Law No 7/2021 (Taxation Regulation Harmonization)
determined based on
Resident Taxpayer and gross income minus
Taxable Income Permanent expenses to obtain,
Establishment collect, and maintain
income
to obtain
Expense:
Deductible
to maintain Income Tax Object
Expense
to collect
The imposition of deductible expense can be made in the
year of expenditure or during the useful life of the expense
DEDUCTIBLE EXPENSES
a) Expenses that are directly or indirectly related to business activities, including:
1. expenses for the purchase of 4. travel expenses;
materials; 5. waste treatment expenses;
2. expenses related to work or 6. insurance premiums;
services including wages,
salaries, honoraria, bonuses, 7. promotion and sales expenses;
gratuities, and allowances that 8. administrative expenses; and
aregiven in the form of money; 9. taxes except Income Tax;
3. interest, rent, and royalties;
DEDUCTIBLE EXPENSES
b) depreciation on expenditure to acquire tangible assets and amortization
on expenditure to acquire rights and on other costs that have a useful life
of more than 1 (one) year as referred to in Article 11 and Article 11A;
c) contributions to pension funds whose establishment has been authorized
by the Financial Services Authority;
d) losses due to the sale or transfer of assets owned and used in the
company or owned to obtain, collect company or owned to earn, collect,
and maintain income;
e) foreign exchange losses;
f) research and development costs of the company conducted in Indonesia;
g) scholarship, internship, and training expenses;
DEDUCTIBLE EXPENSES
h. Receivables that are obviously uncollectible provided that:
3. the collection case has been
submitted to the Civil Court or the
government agency handling state
receivables; or there is a written
1. has been charged off as an expense agreement regarding the write-off of
in the commercial income statement; receivables/ debt relief between the
creditor and the debtor concerned; or
2. Taxpayers must submit a list of it has been published in a general or
uncollectible receivables to the particular publication; or there is an
Directorate General of Taxes; and acknowledgment from the debtor
that his debt has been written off for
a certain amount of debt;
4. the conditions as referred to in point
3 do not apply to the write-off of bad
debts of small debtors
DEDUCTIBLE EXPENSES
i) donations in the national disaster l) donations for educational
management program, the facilities, the provisions of which
provisions of which are regulated are regulated by Government
by Government Regulation; Regulation;
j) donations in the form of research m) donations in the form of sports
and development conducted in development, the provisions of
Indonesia, the provisions of which which are regulated by
are regulated by Government Government Regulation; and
Regulation;
n) reimbursement costs or rewards
k) social infrastructure development given in the form of natura
expenses, the provisions of which and/or pleasures.
are regulated by Government
Regulation;
Article 6 Paragraph 2
Law No 7/2021 (Taxation Regulation
Harmonization)
Loss Compensation
If the gross income after deduction as referred to in
paragraph (1) is obtained loss, the loss shall be
compensated with income starting from the following
tax year continuously up to 5 (five) years
Article 7 Paragraph 1
Law No 7/2021 (Taxation Regulation Harmonization)
Non Taxable
Resident Individual Income
Deduction
Taxpayer (Penghasilan Tidak
kena Pajak-PTKP)
NON TAXABLE INCOME
(PENGHASILAN TIDAK KENA PAJAK-PTKP)
Non-taxable income per year is given at least:
a) Rp54.000.000 (fifty four million rupiah) for the individual taxpayer;
b) Rp4.500.000 (four million five hundred thousand rupiah) additional
for married taxpayers;
c) Rp54.0O0.000 (fifty four million rupiah) additional for a wife whose
income is combined with the husband's income
d) Rp4.500.000 (four million five hundred thousand rupiah) additional
for each member of the blood family and relatives in the straight
line of descent and adopted children, who are fully dependent, a
maximum of 3 (three) persons for each family.
Non Taxable Income will be determined by the conditions at the beginning of the tax year or the beginning of
part of the tax year.
Article 9 Paragraph 1
Law No 7/2021 (Taxation Regulation Harmonization)
Resident Taxpayer Can not be used
Non Deductible
and Permanent to calculate the
Expenses
Establishment taxable income
Non Deductible Expense
a) distribution of profits by any name and in any form such as dividends, including dividends
paid by insurance companies to policyholders, and distribution of the remaining results of
cooperatives;
b) expenses charged or incurred for the personal benefit of shareholders, allies, or members;
c) establishment or accumulation of reserve funds that meet certain requirements, except:
1. reserves for bad debts for banks and other business entities that extend credit, leases
with option rights, consumer finance companies, and factoring companies calculated
based on applicable financial accounting standards with certain limits after coordination
with the Financial Services Authority;
2. reserves for insurance businesses including social assistance reserves established by the
Social Security Organizing Agency;
3. guarantee reserves for the Deposit Insurance Corporation;
4. reclamation cost reserve for mining business;
5. reserves for replanting costs for forestry business; and
6. industrial waste disposal site closure and maintenance cost reserve for industrial waste
treatment business
Non Deductible Expense
d) premiums for health insurance, accident insurance, life insurance, endowment
insurance, and scholarship insurance, paid by individual taxpayers, unless paid by
the employer and the premiums are counted as income for the taxpayers
concerned;
e) the amount that exceeds the fairness paid to shareholders or to parties who have
a special relationship as compensation in connection with the work performed;
f) assets donated, aids or donations, and inheritance
g) Income Tax;
h) expenses charged or incurred for the personal interest of the taxpayer or his/her
dependents;
i) salary of partnership, firm, or limited liability company whose capital is not
divided into shares;
j) administrative sanctions in the form of interest, fines, and increases as well as
criminal sanctions in the form of fines relating to the implementation of the
provisions of laws and regulations in the field of taxation.
Special Relationship
Article 18 Paragraph (4)
The relationship of direct or indirect capital participation is
at least 25% by one taxpayer in one or more other
taxpayers; including relations between taxpayers whose
capital becomes the object of participation.
Domination relationship of one taxpayer in one or more
other taxpayers; including relationships between taxpayers
that are dominated (domination of management and
technology)
Family relationships both bloodlines and marriage in a
straight line and / or sideways one degree.
11
Ilustration (1)
(Special relationship)
Some pharmaceutical companies in Indonesia form an operating alliance that aims to
simplify the process of implementing joint research and development. The following are
profiles of companies registered as members of the alliance.
No. Name President Director Stockholders
1. PT. CIS Sarpakenaka 100% Public
2. PT. PBA Adirata 35% PT. CIS, 15% PT. KNA, 50% Public
3. PT. KNA Sarpakenaka 30% PT. CIS, 70% Public
4. PT. PRE Barbarika 80% PT. PBA, 5% PT. HTE, 15% Public
5. PT. HTE Durna 15% PT. KNA, 85% Public.
All medicines are produced under a license
owned by PT. PBA.
What companies can be called as having a special relationship?
12
Ilustration (1) Ilustration (2)
(Special relationship) (special relationships)
Some pharmaceutical companies in Indonesia form an operating alliance that aims to Answer:
simplify the process of implementing joint research and development. The following are The special relationships formed by the five companies include:
profiles of companies registered as members of the alliance. • Relationship between PT. CIS to PT. PBA, due to direct ownership above 25%
(35%).
• Relationship between PT. PBA to PT. PRE, due to direct ownership above 25%
No. Name President Director Stockholders (80%).
1. PT. CIS Sarpakenaka 100% Public • Relationship between PT. CIS to PT. PRE, due to indirect ownership above 25%
2. PT. PBA Adirata 35% PT. CIS, 15% PT. KNA, 50% Public (28% through PT. PBA).
3. PT. KNA Sarpakenaka 30% PT.CIS, 70% Public • Relationship between PT. CIS to PT. KNA, due to direct ownership above 25%
4. PT. PRE Barbarika 80% PT. PBA, 5% PT. HTE, 15% Public (30%), and due to the similarity of the position of the President Director.
5. PT. HTE Durna 15% PT. KNA, 85% Public. • Relationship between PT. KNA to PT. PBA, as a result of the same - is an object of
All medicines are produced under a license
owned by PT. PBA.
equity participation of PT. CIS with ownership above 25%.
• Relationship between PT. KNA to PT. PRE, due to the same - is the object of
What companies can be called as having a special relationship? capital participation of PT. CIS with ownership above 25%.
• Relationship between PT. PBA to PT. HTE, due to control in the form of dominance
12 in the use of production licenses. 13
Depreciation of Tangible
Assets
Depreciable Assets In Accordance
Depreciable
With The Tax Provisions: Asset in Article 11
Law No 7/2021 (Taxation Regulation Harmonization)
1. Depreciable assets are tangible assets
2. Have a useful life of more than one year
3. Used to obtain, collect and maintain income
Depreciation Commencement
Depreciation of tangible assets begin in spending or in the completion
of the construction of an asset
However, based on the approval of the DGT, the commencement of
depreciation can be carried out in the month of property is used to
obtain, collect, and maintain the income or in the month of assets
will begin to produce (at the start of production)
The Methods of Depreciation in Income Tax Law
Income Tax Act. 11
1. For tangible fixed assets instead of building
used:
- Straight Line Method or
- Declining Balance Method
2. For fixed assets such as buildings used:
Straight Line Method
Determination of The Group and Rates of Depreciation
for Tangible Assets
(Income Tax Act 11)
Tangible Useful Life (in Depreciation Rate
Assets Group year) Straight Line Method Declining Balance
(%) Method (%)
Non-Building:
Group 1 4 25 50
Group 2 8 12,5 25
Group 3 16 6,25 12,5
Group 4 20 5 10
Building :
Permanent 20 5
Non- 10 10
Permanent
Withdrawal of Assets Not Building
Unused fixed assets can be drawn from consumption.
The provisions of Article 11, paragraph 8 of the
Income Tax state:
In the event of the sale or withdrawal of assets or
withdrawal of assets due to other causes, the book
value of the asset will be charged as a loss.
The selling price or insurance reimbursement
received or acquired is recorded as income in the year
of withdrawal
Gain or loss on a transfer or withdrawal of taxable in
the year of the transfer or withdrawal of property will
be a object of income tax
• If the property burned or sold, the net price
from the sale and/or insurance will be
recorded as income
• When the property transferred to donations,
grants or inheritance then the remaining
amount of its book valeu should not be
charged as a loss by the assignor.
• Depreciation begins months and expenditure
will end in withdrawal.
AMORTIZATION OF INTANGIBLE ASSET
Amortization is an expenditure to acquire intangible assets and other
expenditures including the cost of renewal of building use rights,
business use rights, use rights, and goodwill that has a useful life of
more than 1 (one) year which is used to obtain, collect, and maintain
income is carried out in equal parts or in decreasing parts over the
useful life, which is calculated by applying the amortization rate to the
expenditure or to the residual value of the book and at the end of the
useful life is amortized at once provided that it is carried out in a
consistent manner.
Amortization begins in the month in which the expenditure is incurred,
except for certain lines of business.
Straight Line Method
AMORTIZATION
METHOD IN
INCOME TAX
LAW
Declining Balance
Method
Grouping of Intangible Fixed Assets &
Amortization Rates
Intangible Assets Useful Life Amortization Rate (%)
Group (in year)
Straight Line Declining
Method Balance Method
Group 1 4 25 50
Group 2 8 12,5 25
Group 3 16 6,25 12,5
Group 4 20 5 10
Transfer of Intangible Assets
In the event of intangible assets transfer, the residue
value or the asset rights will be charged as a loss for the
assignor
the compensation treated as income in the year of the
transfer
EXAMPLE
PT. Abadi enduring the cost to acquire mining rights of
oil and gas at a location of Rp. 600.000.000. As many as
200 million barrels is estimated for oil content. When
the oil and gas production reached 100 million barrels,
and mining rights sold to another party for
Rp. 400.000.000, -.
How is the calculation of income and loss of sales?
ANSWER
Acquisition Price Rp600.000.000
Amortization:
100.000.000/200.000.000 x 100% x 600.000.000 (Rp300.000.000)
Book Value Rp300.000.000
Mining Right Selling Price Rp400.000.000
The book value Rp. 300.000.000, - is charged as losses and the sale price is
recorded as income
