New Rule On Bad Debts As Deductible Expenses
The Indonesian Minister of Finance through her Decree No. 105/PMK.03/2009 dated 10 June 2009 has issued a new rule on the filing of bad debts as deductible expenses.
For the purpose of the recordation of a bad debt as deductible expenses in the income tax statement, the following are the requirements:
1. the bad debt has been charged to the respective commercial financial statement;
2. the Taxpayer has provided the Directorate General of Taxes with information on the bad debt which contains the name, address and taxpayer code number of the debtor, and the bad debt amount by attaching it in its annual tax return; and
3. the case has been filed to the court or government agency having the capacity to handle state receivables or there is a written agreement on the discharge of indebtedness between the debtor and the creditor or the case has been published in the media or a letter of acknowledgement from the debtor has been rendered to acknowledge the annulment of the debt for a specific amount.
The fulfillment of the above requirements is to be done by attaching:
a. a copy of evidence of the submission of the claim case to the District Court or government agency handling state receivables; or
b. a copy of the written agreement concerning the annulment of the receivables / release of business debts, legalized by notary; or
c. a copy of the publication of the case; or
d. a letter of acknowledgement from the debtor stating that the debt has been forgiven and acknowledgment from the creditor of the debt forgiveness for the specific amount.
Bad debts between affiliated parties are eligible as deductible expenses.
The decree took effect retroactively as of 1 January 2009. [Freddy Karyadi]