Indonesia Tax Deductions

Corporate Income Tax Deductions:

• Business expenses directly related to generating income are generally deductible.  

Deductible expenses include:

• Salaries and wages.
• Rent and utilities.  
• Cost of goods sold.
• Interest expenses (subject to limitations).  
• Depreciation of assets (according to prescribed rates).
• Amortization of intangible assets.  
• Research and development expenses (with specific conditions).  
• Bad debt expenses, under specific conditions.
• Losses can be carried forward for a specified period.  
• Losses can not be carried back.

Individual Income Tax Deductions:

• Deductions for individuals vary based on residency status and income type.

Common deductions include:

• Pension contributions.  
• Occupational expenses.  
• Personal exemption (PTKP).  
• Certain charitable donations.  
• Non-resident individuals may have limited deductions, depending on income sources.

Withholding Tax:

• Payments to non-residents may be subject to withholding tax.  
• The withholding tax is not a deduction, but a tax collected at the source.
• The amount withheld, is then credited against the final tax liability.

Double Taxation Avoidance Agreements (DTAAs):

• DTAAs may provide for reduced withholding tax rates or exemptions.  
• DTAAs vary based on the country of residence.

Value Added Tax (VAT) Input Tax Credit:

• Businesses registered for VAT can claim input tax credit on eligible purchases.  
• The input tax credit can offset output VAT liability.

Depreciation and Amortization:

• Depreciation is allowed on tangible assets used for business.
• Amortization is allowed on intangible assets used for business.  
• Depreciation and amortization rates are prescribed by Indonesian tax law.

Interest Deductions:

• Interest expenses are generally deductible if related to business or income generation.  
• Limitations may apply, particularly concerning related-party transactions.

Charitable Donations:

• Donations to approved charitable organizations are deductible, with limitations.

Business Losses:

• Business losses may be carried forward for a specified number of years.

Specific industry deductions:

• Specific industry deductions can apply, regarding the Oil, gas, and mining industries.
• It is important to consult with a qualified tax professional in Indonesia for accurate and personalized guidance.