Sales of a company’s assets (other than land and building) may result in capital gains or losses, calculated as the difference between the sales proceeds and the tax written-down value of the assets concerned. Capital gains are assessable whilst a capital loss is tax-deductible only if the asset concerned is used in the running of the business, i.e., for obtaining, collecting, and securing assessable income.
Revaluation of fixed assets
Subject to the Director General of Tax (DGT) approval, corporate taxpayers and PEs who maintain rupiah accounting may undertake a revaluation of their non-current tangible assets for tax purposes. This may be carried out once every five years. Each revaluation must include all business-related assets which are owned by the company and located in Indonesia, except for land (this may be omitted). Before requesting the DGT’s approval, the company concerned must determine that it has settled all of its outstanding tax liabilities.
The revaluation must be conducted on a market or fair value basis. The market values must be determined by a government-approved appraiser. These are subject to DGT adjustments if the values, in the DGT’s view, do not represent the fair or market values of the assets.
Once approved, the depreciation applied to depreciable assets must be based on the new tax book values (approved values) on the basis of a full useful life (in other words, as if the assets were new).
The excess of the fair market value over the old tax book value of the revalued assets is subject to final income tax at a rate of 10%. Subject to the DGT approval, taxpayers facing financial difficulties may pay this tax in instalments over 12 months.
Fixed assets falling under categories 1 and 2 must be retained at least to the end of their useful life. Land, buildings, and assets falling under categories 3 and 4 must be retained for at least 10 years after the revaluation date. Additional final income tax at a rate of 10% is imposed on the original revaluation gains if the revalued assets are sold or transferred before the end of this minimum retention period. This does not apply to:
a.Transfer of assets because of force majeur or based on a Government decision/policy or a court decision;
b.Transferred in the course of a tax-neutral business merger, consolidation, or business split;
c.Withdrawal of fixed assets of a company because of irreparable damage.