Disallowed deductions

There are a number of non-deductible expenses. These non- deductible expenses are specified in the law or in associated regulations and pronouncements. Major categories of non- deductible expenses include:

1. Benefits-in-kind (BIKs) (e.g., free housing, 50% of the acquisition and maintenance costs of certain company provided cars), except food and drink provided to all employees, employee benefits required for job performance such as protective clothing and uniforms, transportation costs to and from the place of work, accommodation for ship crews and the like, the cost of providing BIKs in remote areas, and 50% of the acquisition and maintenance costs of cellular phones;
2. Private expenses;
3. Non-business gifts and aid, except zakat (Islamic alms) and donations for handling national disasters, research and development performed in Indonesia, social infrastructure development, educational facilities, and sports development;
4. Provisions: However, certain types of provision are claimable as deductible expenses: provision for doubtful accounts for banking and financing companies, credit providers, financial lease companies, factoring companies, PT Permodalan Nasional  Madani (PNM) insurance claims provision for insurance companies, deposit security  provision for the Deposit Insurance Corporation (Lembaga  Penjamin Simpanan/LPS), reclamation provision for  mining companies, forestation provision for forestry companies, and area closure and maintenance provision for industrial waste processing businesses;
5. Income tax payments;
6. Tax penalties;
7. Profit distributions in the form of dividend;
8. Employer contributions for life, health and accident  insurance and contributions to unapproved pension funds, unless the contributions are treated as part of the taxable income of employees;
9. Expenses relating to income which is taxed at a final rate, e.g., interest on loans relating to time deposits;
10. Expenses relating to income which is exempt from tax, e.g., interest on loans used to buy shares where dividends to be received are not subject to income tax;
11. Salaries or compensation received by partnership or firm’s members where their participations are not divided into shares.
12. 50% of depreciation, operating and maintenance costs for cars and mobile telephones provided to employees;
13. Amounts exceeding fair  value paid to shareholders or parties having special relationships as recompense for work performed
14. Administrative sanctions

Gain from foreign exchange is taxable and loss incurred from foreign exchange can be treated as deductible expense, except for those arising from transactions that are subject to final tax or non-tax object.