3 Exciting Updates in Indonesian Tax Regulations: CIT Reductions, Bad Debt Deductions, and Core Tax System Changes

1. Bad Debt Deductions under Regulation No. 74/2024 (PMK-74)

On October 18, 2024, the MoF issued Regulation No. 74/2024 (PMK-74), which brings substantial changes to the treatment of bad debt deductions for certain businesses. This regulation, which amends previous MoF regulations No. 81/PMK.03/2009 and No. 219/PMK.011/2012, allows businesses in the financial sector—specifically banks, finance companies, and cooperatives registered with the Indonesian Financial Services Authority (OJK)—to deduct bad debt expenses from their taxable income.

To qualify for this deduction, businesses must submit specific documentation, including a list of uncollectible receivables and evidence showing that reasonable efforts were made to collect the debts. These documents, which must be attached to the annual corporate income tax return, include legal proof such as court case submissions, written agreements, and debtor acknowledgements. This update is expected to ease the financial burden on businesses dealing with uncollected debts while enhancing transparency in the tax reporting process.

2. Corporate Income Tax Reduction Facilities (PMK-69)

In a bid to improve the investment climate in Indonesia, the MoF has also amended Regulation No. 130/PMK.010/2020 with the issuance of Regulation No. 69/2024 (PMK-69) on October 9, 2024. This new regulation offers tax reduction facilities—commonly referred to as a tax holiday—to encourage investments that contribute to job creation and technological advancement.

Under PMK-69, companies investing over IDR 500 billion are eligible for tax reductions of up to 100% over a period of five to 20 years, depending on the size of their investment. The regulation also simplifies the application process, with businesses now required to apply through the online Single Submission (OSS) system. This digital process eliminates offline submissions and streamlines the steps necessary for businesses to access tax incentives.

Additionally, the regulation includes provisions for multinational companies, ensuring that those who benefit from tax facilities in Indonesia still comply with the global minimum tax rate of 15%, as per the OECD’s guidelines. This aims to curb base erosion and profit shifting while ensuring that Indonesia’s tax system remains competitive.

3. Core Tax Administration System (PMK-81)

On October 14, 2024, the MoF introduced Regulation No. 81/2024 (PMK-81), which will take effect on January 1, 2025. This regulation lays the foundation for the implementation of the Core Tax Administration System (Pembaruan Sistem Inti Administrasi Perpajakan), designed to modernize Indonesia’s tax administration by shifting from manual processes to a fully digital and integrated system.

PMK-81 introduces several key changes, including the electronic submission of tax returns, the processing of tax notifications, and the signing of tax decisions through digital platforms. It also outlines the procedures for tax registrations and payments, with the goal of simplifying compliance and reducing administrative burdens. The regulation aims to ensure more efficient tax collection and quicker processing of refunds for businesses with high compliance rates.

Additionally, PMK-81 makes provisions for asset transfers in cases of mergers, consolidations, and acquisitions, allowing businesses to use book values for tax purposes. This change is designed to minimize the fiscal impact of restructuring while ensuring that the transactions are aligned with legitimate business objectives.

Conclusion

The recent changes to Indonesian tax regulations reflect the government’s efforts to modernize the tax system, provide more incentives for investment, and streamline tax administration processes. For businesses, the introduction of tax holiday facilities, the deductibility of bad debt expenses, and the implementation of the Core Tax Administration System all offer opportunities to optimize tax compliance and improve financial management. As these regulations take effect, companies operating in Indonesia should ensure they are up-to-date with the latest requirements to fully benefit from these changes.

Source
https://www.internationaltaxreview.com/article/indonesian-tax-roundup-amended-regulation-issued-on-cit-reduction-facilities
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