Certain contractually based concessions are available in Indonesia. These include Production Sharing Contracts (PSCs), Contract of Works (CoWs) and Mining Business Licenses (Izin Usaha Pertambangan/IUP). Companies engaged in upstream oil and gas typically have to calculate CIT in accordance with their PSCs. The PSCs can be “conventional” with CIT effectively based on cost recovery principles… Read More
Deemed profit margins
The following businesses have deemed profit margins for tax purposes: Notes: 1 The effective income tax rate (eitr) is calculated using the old tax rate of 30% because the MoF has not revised the decrees which regulate the deemed profit margins. 2 The eitr is calculated using the current tax rate of 25%, Branch Profit… Read More
Profit distributions
Tax is liable to be withheld from dividends as follows: a. Resident recipients Dividends received from an Indonesian company by a limited liability company incorporated in Indonesia (Perseroan Terbatas/PT), a cooperative, or a state owned company, are exempt from income tax if the following conditions are met: • the dividends are paid out of retained… Read More
Losses
Losses may be carried forward for a maximum of five years. However, for a limited category of businesses in certain regions or businesses subject to certain concessions, the period can be extended for up to 10 years. The carrying back of losses is not allowed. Tax consolidation and group relief is not available.
Debt to Equity Ratio
A single ratio of 4:1 is generally applicable, which means the amount of debt allowable in order to obtain full deductibility of the financing cost is limited to four times the equity amount. Exemption applies to certain taxpayers.
Disallowed deductions
These include: a. 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 toall 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 crew and the likes,… Read More
Asset transfers
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… Read More
Assets arising from Tax Amnesty program
Indonesia has rolled out Tax Amnesty program from 1 July 2016 to 31 March 2017 and any newly declared assets under this program cannot be depreciated or amortised for tax purposes. The acquisition costs of these assets are based on the value declared in the Tax Amnesty Declaration Letter.
Capital allowances
Depreciation Expenditure incurred in relation to assets with a beneficial life of more than one year are categorized and depreciated from the month of acquisition by the consistent use of either the straight-line or the declining-balance method, as follows: 1.Category 1 – 50% (declining-balance) or 25% (straight-line) on assets with a beneficial life of four… Read More
Controlled foreign companies
Profits of a Controlled Foreign Companies (CFCs) are subject to deemed dividend rules in Indonesia. A CFC is a foreign entity that is at least 50% owned by an Indonesian taxpayer or at least 50% collectively owned by Indonesian taxpayers. The scope of CFC income also covers income from indirectly owned CFC with a minimum… Read More
INDONESIAN TAX 