PP 55 tahun 2022 (English)

(1)

Revokes 18 Year 2009, 23 Year 2018, 30 Year 2020 Partially Revokes 94 Year 2010, 9 Year 2021, 29 Year 2020 Type: GOVERNMENT REGULATION (PP)

By: THE PRESIDENT OF THE REPUBLIC OF INDONESIA Number: 55 YEAR 2022

Date: 20 DECEMBER 2022 (JAKARTA) Reference: LN 2022/231 TLN 6836

Title: ADJUSTMENT OF REGULATION IN THE FIELD OF INCOME TAX

BY THE GRACE OF THE ALMIGHTY GOD THE PRESIDENT OF THE REPUBLIC OF INDONESIA, Considering:

a. whereas to provide legal certainty, simplification of tax administration, facilitation, and justice to taxpayers that have certain gross turnover within a certain period, as well as to implement international treaties in the field of taxation with due observance of good governance, it is necessary to provide a fiscal policy through the adjustment of regulation in the field of income tax;

b. whereas with the promulgation of Law Number 7 Year 2021 regarding Harmonization of Taxation Regulations, an adjustment to the regulation of taxation policies that is comprehensive and consolidated is needed;

c. whereas based on the considerations as referred to in letter a and letter b as well as to implement the provisions of Article 4 paragraph (2) letter e, Article 4 paragraph (3) letter a number 1, Article 17 paragraph (2e), and Article 32C of Law Number 7 Year 1983 regarding Income Tax as amended several times most recently by Law Number 7 Year 2021 regarding Harmonization of Taxation Regulations, it is necessary to stipulate a Government Regulation regarding Adjustment of Regulation in the Field of Income Tax;

In view of:

1. Article 5 paragraph (2) of the 1945 Constitution of the Republic of Indonesia;

2. Law Number 7 Year 1983 regarding Income Tax (State Gazette of the Republic of Indonesia Year 1983 Number 50, Supplement to State Gazette of the Republic of Indonesia Number 3263) as amended several times most recently by Law Number 7 Year 2021 regarding Harmonization of Taxation Regulations (State Gazette of the Republic of Indonesia Year 2021 Number 246, Supplement to State Gazette of the Republic of Indonesia Number 6736);

HAS DECIDED:

(2)

To stipulate: GOVERNMENT REGULATION REGARDING ADJUSTMENT OF REGULATION IN THE FIELD OF INCOME TAX.

CHAPTER I GENERAL PROVISIONS

Article 1 Referred to herein as:

1. Law on Income Tax shall be Law Number 7 Year 1983 regarding Income Tax as amended several times most recently by Law Number 7 Year 2021 regarding Harmonization of Taxation Regulations.

2. Income Tax shall be Income Tax as referred to in the Law on Income Tax.

3. Taxpayer shall be an individual or entity, including tax payer, tax withholder, and tax collector, which has taxation rights and obligations in accordance with the provisions of taxation laws and regulations.

4. Tax Year shall be a period of 1 (one) calendar year unless the Taxpayer uses an accounting year that is different from the calendar year.

5. Tax Return shall be a letter that is used by a Taxpayer to report the calculation and/or payment of tax, tax object and/or non-tax object, and/or assets and liabilities in accordance with the provisions of taxation laws and regulations.

6. Annual Tax Return shall be a Tax Return for a Tax Year or part of a Tax Year.

7. Hajj Fund Management Agency shall be an institution that manages the hajj finance.

8. Hajj Pilgrimage Cost shall be an amount of fund that must be paid by a citizen who will carry out hajj pilgrimage.

9. Special Hajj Pilgrimage Cost shall be an amount of fund that must be paid by a citizen who will carry out special hajj pilgrimage.

10. Arm’s Length Principle shall be a principle that applies in sound business practices carried out as independent transactions.

11. Transfer Pricing shall be a price in a transaction that is affected by a special relationship.

12. Public Company shall be a public company or company that carries out a public offering of shares in accordance with the provisions of laws and regulations in the field of capital market.

13. Public Company Taxpayer shall be a domestic corporate Taxpayer in the form of a Public Company.

14. Employee shall be an individual who works in an employer based on an agreement, contract, or employment agreement, whether in writing or non- writing, to perform work in a certain position or activity by obtaining a

(3)

compensation that is paid based on a certain period, work completion, or other provisions set forth by the employer, including an individual who carries out work in the government sector.

15. Minister shall be a minister who administers government affairs in the field of state finance.

CHAPTER II

OBJECT OF INCOME TAX Part One

Object of Income Tax Article 2

The item that becomes a tax object shall be income, namely every additional economic capability that is received or earned by a Taxpayer, both originating from Indonesia and from outside Indonesia, which can be used for consumption or to increase the wealth of the Taxpayer concerned, in any name and any form as referred to in Article 4 paragraph (1) of the Law on Income Tax.

Part Two

Criteria of Certain Skills as well as Imposition of Income Tax for Foreign Citizens

Article 3

(1) Excluded from the provision as referred to in Article 2, a foreign citizen who has become a domestic tax subject shall be subject to Income Tax only on the income that is received or earned from Indonesia with the following provisions:

a. having certain skills in accordance with the provisions of laws and regulations; and

b. valid for 4 (four) Tax Years that is counted as of becoming a domestic tax subject.

(2) Included in the definition of income that is received or earned from Indonesia as referred to in paragraph (1) shall be income that is received or earned by a foreign citizen in relation to the work, service, or activity in Indonesia in any name and any form that is paid outside Indonesia.

(3) The provision as referred to in paragraph (1) shall not apply to a foreign citizen who utilizes the agreement on avoidance of double taxation between the Government of Indonesia and government of partner country or partner jurisdiction of the agreement on avoidance of double taxation where the foreign citizen obtains income from outside Indonesia.

Article 4

(1) The foreign citizen who has certain skills as referred to in Article 3 paragraph (1) letter a shall include a foreign worker who occupies a certain position and a foreign researcher.

(4)

(2) The foreign citizen having certain skills as referred to in paragraph (1) who is employed by an employer must meet the requirements regarding:

a. use of foreign worker who can occupy a certain position set forth by the minister who administers government affairs in the field of manpower; or b. foreign researcher set forth by the head of institution that administers

government duties in the field of research, development, review, and application, as well as invention and innovation, nuclear operations, and integrated space management.

(3) The criteria of certain skills as referred to in paragraph (1) shall include:

a. having skills in the field of science, technology, and/or mathematics, proven by:

1. certificate of proficiency that is issued by an institution that has been designated by the Government of Indonesia or government of the country of origin of foreign worker;

2. education certificate; and/or

3. minimum work experience of 5 (five) years,

in the field of science or field of work that is in accordance with the field of expertise; and

b. having the obligation to carry out the transfer of knowledge.

Article 5

Provisions regarding procedures for imposition of Income Tax for a foreign citizen as referred to in Article 3 and Article 4 shall be regulated in a Ministerial Regulation.

CHAPTER III

EXEMPTION FROM THE OBJECT OF INCOME TAX Part One

Grant, Assistance, or Donation Article 6

(1) Profit due to the transfer of assets in the form of grant, assistance, or donation shall be an object of Income Tax for the provider.

(2) Exempted as the object of Income Tax as referred to in paragraph (1) shall be as long as:

a. grant, assistance, or donation is given to:

1. consanguine family in the first degree straight lineage;

2. religious agency;

3. educational agency;

(5)

4. social agency including a foundation;

5. cooperative; or

6. individual who runs micro and small business; and

b. there is no relationship with the business, occupation, ownership, or control between the parties concerned.

(3) Provisions regarding:

a. consanguine family in the first degree straight lineage as referred to in paragraph (2) letter a number 1 shall be biological parents and biological children;

b. religious agency as referred to in paragraph (2) letter a number 2 shall be an agency that does not seek any profit with the main activity to manage the place of worship and/or administers activities in the religious sector;

c. educational agency as referred to in paragraph (2) letter a number 3 shall be an agency that does not seek any profit with the main activity to administer education;

d. social agency including a foundation as referred to in paragraph (2) letter a number 4 shall be an agency that does not seek any profit with the main activity to administer:

1. health maintenance;

2. maintenance of the elderly or nursing home;

3. maintenance of orphans and people with disabilities;

4. handling social disability, neglect, and deviant behavior;

5. compensation and/or assistance to victims of natural disaster, accident, and the kind;

6. provision of scholarship; and/or 7. environmental preservation;

e. cooperative as referred to in paragraph (2) letter a number 5 shall be an entity as regulated in the provisions of laws and regulations in the field of cooperatives; or

f. individual who runs micro and small business as referred to in paragraph (2) letter a number 6 shall be an individual who owns and runs productive business that meets the following criteria:

1. has a maximum net assets of Rp500,000,000.00 (five hundred million rupiah) excluding land and building of business premises;

or

(6)

2. has an annual business turnover of up to Rp2,500,000,000.00 (two billion five hundred million rupiah).

(4) Provisions regarding procedures for assessment and calculation on profit due to the transfer of assets as referred to in paragraph (2) shall be regulated in a Ministerial Regulation.

Article 7

(1) Granted assets shall be exempted from the object of Income Tax as long as:

a. received by:

1. consanguine family in the first degree straight lineage;

2. religious agency;

3. educational agency;

4. social agency including a foundation;

5. cooperative; or

6. individual who runs micro and small business, as referred to in Article 6 paragraph (3); and

b. there is no relationship with the business, occupation, ownership, or control between the parties concerned.

(2) The granted assets as referred to in paragraph (1) may be in the form of money or goods.

(3) Provisions regarding procedures for assessment and calculation on granted assets in the form of goods as referred to in paragraph (2) shall be regulated in a Ministerial Regulation.

Part Two

Assistance or Compensation Paid by A Social Security Administrator to

A Certain Taxpayer Article 8

(1) Assistance or compensation paid by the Social Security Administrator to a certain Taxpayer shall be exempted from the object of Income Tax.

(2) The Certain Taxpayer as referred to in paragraph (1) shall be:

a. Taxpayer or member of community that is poor;

b. Taxpayer or member of community who experiences a natural disaster;

and/or

c. Taxpayer or member of community who is affected by a disaster.

(7)

(3) Provisions regarding assistance or compensation paid by the Social Security Administrator to a certain Taxpayer that is exempted from the object of Income Tax as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Part Three

Provision on Exemption of Income Tax upon Dividend or Other Income

Article 9 (1) Income in the form of:

a. dividend that originates domestically or dividend that originates from overseas; or

b. other income in the form of income after tax of a permanent establishment overseas and income from overseas not through the permanent establishment,

which meets certain requirements shall be exempted from the object of Income Tax.

(2) The dividend as referred to in paragraph (1) letter a shall be exempted from the object of Income Tax with the following provisions:

a. dividend originating domestically and received or earned by a Taxpayer of:

1. domestic individual as long as the dividend is invested in the territory of Unitary State of the Republic of Indonesia within a certain period; and/or

2. domestic entity;

b. dividend originating from overseas and received or earned by a domestic corporate Taxpayer or domestic individual Taxpayer as long as invested or used to support other business activities in the territory of Unitary State of the Republic of Indonesia within a certain period;

c. dividend originating from overseas as referred to in letter b shall be:

1. dividend distributed originating from a business entity overseas the shares of which are traded in the stock exchange; or

2. dividend distributed originating from a business entity overseas the shares of which are not traded in the stock exchange in accordance with the proportion of shareholding;

d. dividend distributed originating from a business entity overseas the shares of which are traded in the stock exchange as referred to in letter c number 1 shall be exempted from the object of Income Tax amounting to the dividend invested in the territory of Unitary State of the Republic of Indonesia within a certain period;

(8)

e. in the event that the dividend distributed originating from a business entity overseas the shares of which are traded in the stock exchange as referred to in letter d is invested in the territory of Unitary State of the Republic of Indonesia less than the dividend received or earned by a Taxpayer, the following provisions shall apply:

1. for the invested dividend, it shall be exempted from the imposition of Income Tax; and

2. for the difference of dividend received or earned by a Taxpayer less the invested dividend as referred to in number 1, it shall be subject to Income Tax;

f. other than meeting the requirements as referred to in letter b, the dividend distributed originating from a business entity overseas the shares of which are traded in the stock exchange as referred to in letter c number 2 must be:

1. invested not less than 30% (thirty percent) of the profit after tax;

or

2. invested before the Director General of Taxes issues tax assessment for the dividend in relation to the application of Article 18 paragraph (2) of the Law on Income Tax;

g. in the event that the dividend as referred to in letter f is invested in Indonesia after the Director General of Taxes issues tax assessment for the dividend in relation to the application of Article 18 paragraph (2) of the Law on Income Tax, the intended dividend shall not be exempted from the imposition of Income Tax;

h. in the event that the dividend distributed originating from a business entity overseas the shares of which are not traded in the stock exchange as referred to in letter f, is invested in the territory of Unitary State of the Republic of Indonesia less than 30% (thirty percent) of the total profit after tax, the following provisions shall apply:

1. for the invested dividend, it shall be exempted from the imposition of Income Tax;

2. for the difference of 30% (thirty percent) of profit after tax less the invested dividend as referred to in number 1, it shall be subject to Income Tax; and

3. for the remaining profit after tax less the invested dividend as referred to in number 1 as well as to the difference as referred to in number 2, it shall not be subject to Income Tax;

i. in the event that the dividend distributed originating from a business entity overseas the shares of which are not traded in the stock exchange as referred to in letter f, is invested in the territory of Unitary State of the Republic of Indonesia more than 30% (thirty percent) of the total profit after tax, the following provisions shall apply:

(9)

1. for the invested dividend, it shall be exempted from the imposition of Income Tax; and

2. for the remaining profit after tax less the invested dividend as referred to in number 1, it shall not be subject to Income Tax;

j. the dividend exempted from the object of Income Tax as referred to in letter a and letter b shall be a dividend distributed based on the general meeting of shareholders or interim dividend in accordance with the provisions of laws and regulations;

k. the general meeting of shareholders or interim dividend as referred to in letter j shall include a similar meeting and a similar mechanism of dividend distribution;

l. dividend originating domestically that is received or earned by a domestic individual Taxpayer or domestic corporate Taxpayer as referred to in letter a, is not deducted by Income Tax;

m. in the event that a domestic individual Taxpayer does not meet the provisions on investment as referred to in letter a number 1, the dividend originating domestically that is received or earned by a domestic individual Taxpayer shall be subject to Income Tax at the moment the dividend is received or earned; and

n. the payable Income Tax as referred to in letter m must be deposited by the domestic individual Taxpayer itself in accordance with the provisions of laws and regulations.

(3) The other income as referred to in paragraph (1) letter b shall be exempted from the object of Income Tax with the following provisions:

a. income after tax from a permanent establishment overseas that is received or earned by the domestic corporate Taxpayer or domestic individual Taxpayer as long as is invested or used to support other business activities in the territory of Unitary State of the Republic of Indonesia within a certain period provided that the income after tax being invested is not less than 30% (thirty percent) of the profit after tax;

b. in the event that the income after tax from a permanent establishment overseas as referred to in letter a, invested in the territory of Unitary State of the Republic of Indonesia is less than 30% (thirty percent) of the total profit after tax as referred to in letter a, the following provisions shall apply:

1. for the income after tax that is invested, it shall be exempted from the imposition of Income Tax;

2. for the difference of 30% (thirty percent) of the profit after tax less the income after tax that is invested as referred to in number 1, it shall be subject to Income Tax; and

3. for the remaining profit after tax less the income after tax that is invested as referred to in number 1 as well as to the difference as referred to in number 2, it shall not be subject to Income Tax;

(10)

c. in the event that the income after tax from a permanent establishment overseas as referred to in letter a, invested in the territory of Unitary State of the Republic of Indonesia is more than 30% (thirty percent) of the total profit after tax as referred to in letter a, the following provisions shall apply:

1. for the income after tax that is invested, it shall be exempted from the imposition of Income Tax; and

2. for the remaining profit after tax less the income after tax that is invested as referred to in number 1, it shall not be subject to Income Tax; and

d. income from overseas not through a permanent establishment that is received or earned by a domestic corporate Taxpayer or domestic individual Taxpayer shall be exempted from the imposition of Income Tax in the event that the income is invested in the territory of Unitary State of the Republic of Indonesia within a certain period and meets the following requirements:

1. the income originates from an active business overseas; and 2. it does not constitute the income from a company owned

overseas.

(4) Tax on income that has been paid or is payable overseas to the income as referred to in paragraph (2) letter b and paragraph (3) letter a and letter d shall be subject to the following provisions:

a. cannot be set off with the payable Income Tax;

b. cannot be charged as costs or deduction of income; and/or c. cannot be requested for the refund of tax overpayment.

(5) In the event that a Taxpayer does not invest the income within a certain period as referred to in paragraph (2) letter b and paragraph (3) letter a and letter d the following provisions shall apply:

a. the income from overseas shall constitute income in the Tax Year earned; and

b. tax on the income that has been paid or is payable overseas on the income shall be tax credit as referred to in Article 24 of the Law on Income Tax.

(6) Provisions regarding procedures for exemption of Income Tax as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 10

(1) The investment as referred to in Article 9 paragraph (2) letter a number 1 and letter b and paragraph (3) must meet certain criteria and period.

(11)

(2) The criteria as referred to in paragraph (1) shall be carried out in the form of investment that includes:

a. government securities of the Republic of Indonesia and government sharia securities of the Republic of Indonesia;

b. bonds or sukuk of state-owned enterprise the trading of which is supervised by the Financial Services Authority;

c. bonds or sukuk of financing institution owned by the government the trading of which is supervised by the Financial Services Authority;

d. financial investment in the receiving bank including a sharia bank;

e. bonds or sukuk of private owned company the trading of which is supervised by the Financial Services Authority;

f. investment in infrastructure through cooperation of government and business entity;

g. investment in the real sector based on priorities that are determined by the government;

h. capital participation in newly established companies and domiciled in Indonesia as a shareholder;

i. capital participation in established companies and domiciled in Indonesia as a shareholder;

j. cooperation with an investment management institution;

k. usage to support other business activities in the form of distribution of loans for micro and small businesses in the territory of Unitary State of the Republic of Indonesia in accordance with the provisions of laws and regulations in the field of micro, small, and medium businesses; and/or l. other legitimate forms of investment in accordance with the provisions of

laws and regulations.

(3) The investment as referred to in paragraph (2) letter a up to letter e and letter I shall be placed in investment instruments in the financial market as follows:

a. debt securities;

b. sukuk;

c. shares;

d. mutual fund participation unit;

e. asset-backed securities;

f. real estate investment trust participation unit;

g. deposit;

(12)

h. savings;

i. giro;

j. futures contract that is traded in the futures exchange in Indonesia;

and/or

k. other investment instruments in the financial market including insurance products related to investment, finance companies, pension funds, or venture capital that obtain approval of the Financial Services Authority.

(4) The investment as referred to in paragraph (2) letter f up to letter I shall be placed in investment instruments outside the financial market as follows:

a. investment in infrastructure through cooperation of government and business entity;

b. investment in the real sector based on priorities that are determined by the government;

c. investment in properties in the form of land and/or building that is built on it;

d. direct investment in companies in the territory of Unitary State of the Republic of Indonesia;

e. investment in precious metal in the form of gold bar or bullion;

f. cooperation with an investment management institution;

g. usage to support other business activities in the form of distribution of loan for micro and small businesses in the territory of Unitary State of the Republic of Indonesia in accordance with the provisions of laws and regulations in the field of micro, small, and medium businesses; and/or h. other investment forms outside the legitimate financial market in

accordance with the provisions of laws and regulations.

(5) The investment as referred to in paragraph (4) letter b and letter d shall be carried out through the mechanism of capital participation into a company in the form of limited liability company.

(6) Sectors that become the priority of government in the investment in the real sector as referred to in paragraph (4) letter b include sectors specified in the national medium term development plan.

(7) The properties as referred to in paragraph (4) letter c shall not include properties obtaining a subsidy from the government.

(8) The precious metal as referred to in paragraph (4) letter e shall be gold bar or bullion with the purity level of 99.99% (ninety-nine point ninety-nine percent).

(13)

(9) The gold bar or bullion as referred to in paragraph (8) shall be gold that is produced in Indonesia and obtains accreditation and certificate from the National Standardization Agency of Indonesia and/or London Bullion Market Association.

(10) The investment as referred to in paragraph (2) cannot be transferred, except in the form of investment as referred to in paragraph (2).

Article 11

The certain period as referred to in Article 10 paragraph (1) shall be carried out with the following provisions:

a. no later than:

1. the end of the third month after the Tax Year of dividend or other income is received or earned, for an individual Taxpayer; or

2. the end of the fourth month after the Tax Year of dividend or other income is received or earned, for a corporate Taxpayer; and

b. no later than 3 (three) Tax Years as of the Tax Year of dividend or other income is received or earned.

Part Four

Income from Investment in

Certain Fields Received by Pension Funds Article 12

(1) Income from investment in certain fields received or earned by pension funds shall be excluded from the object of Income Tax.

(2) The pension funds as referred to in paragraph (1) shall be pension funds the establishment of which has been authorized by the Financial Services Authority.

(3) The pension funds as referred to in paragraph (2), other than having been authorized by the Financial Services Authority, shall also include pension funds that have been authorized by the Minister prior to the transfer of functions, duties, and authorities in the regulation and supervision of pension funds from the Minister to the Financial Services Authority on 31 December 2012.

(4) The income from investment in certain fields as referred to in paragraph (1) shall be in the form of:

a. interest, discount, and return from deposit, certificate of deposit, and savings with banks in Indonesia that implement business activities conventionally or based on the sharia principles, as well as Certificate of Bank Indonesia; or

b. interest, discount, and return from bonds, sharia bonds (sukuk), Government Sharia Securities, and Treasury Notes that are traded and/or reported its trading at the stock exchange in Indonesia.

(5) Provisions regarding procedures for exemption from the object of Income Tax as referred to in paragraph (1) shall be regulated by a Ministerial Regulation.

(14)

Part Five

Scholarship that Meets Certain Requirements and Surplus Received or Earned by Non-Profit Agency or Institution in Education Sector, Research and Development,

Sector, Social, and/or Religious Affairs Article 13

(1) Income in the form of scholarship that meets certain requirements whether received from tax subject and/or non-tax subject, shall be exempted from the object of Income Tax.

(2) The certain requirements as referred to in paragraph (1) shall include scholarship received:

a. by the recipient of scholarship who constitutes an Indonesian Citizen; and b. to attend formal education and/or non-formal education implemented

domestically and/or overseas.

(3) Further provisions regarding scholarship that meets certain requirements exempted from the object of Income Tax as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 14

(2) The surplus that is received or earned by a non-profit agency or institution engaged in the field of education and/or field of research and development, which has been registered with the agency in charge of it, shall be exempted from the object of Income Tax amounting to the total surplus used for:

2. development and/or procurement of facilities and infrastructure for activities in education and/or research and development that are located in the territory of Unitary State of the Republic of Indonesia; and

b. carried out not more than 4 (four) years as of the surplus is received or earned.

(2) The surplus as referred to in paragraph (1) shall be surplus from the calculation of all incomes received or earned other than income that is subject to final Income Tax and/or non-object of Income Tax, less the costs to obtain, collect, and maintain the income.

(3) The development and/or procurement of facilities and infrastructure for education and/or research and development activities as referred to in paragraph (1) letter a shall include the use of surplus that is allocated in the form of endowment fund that meets certain requirements.

Article 15 Provisions regarding:

a. the surplus that is received or earned by non-profit agency or institution engaged in the field of education and/or field of research and development that is

(15)

exempted from the object of Income Tax as referred to in Article 14 paragraph (1); and

b. the use of surplus that is allocated in the form of endowment fund that meets certain requirements as referred to in Article 14 paragraph (3),

shall be regulated in a Ministerial Regulation.

Article 16

(1) The surplus that is received or earned by a social and/or religious agency or institution registered with the agency in charge of it shall be exempted from the object of Income Tax as long as meeting the following requirements:

a. re-invested in the form of social and/or religious facilities and infrastructure; and/or

b. placed as an endowment fund,

within a maximum period of 4 (four) years as of obtaining the surplus.

(2) The surplus as referred to in paragraph (1) shall be surplus from the calculation of all incomes that are received or earned other than income subject to final Income Tax and/or non-object of Income Tax, less the costs to obtain, collect, and maintain the income.

(3) Further provisions regarding surplus that is received or earned by a social and/or religious agency or institution that is exempted from the object of Income Tax as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Part Six

Deposit Funds for Hajj Pilgrimage Cost and/or Special Hajj Pilgrimage Cost and

Income from the Hajj Finance Development in Certain Financial Sectors or Instruments Received by

the Hajj Fund Management Agency Article 17

(1) The receipt of Hajj Fund Management Agency shall include:

a. deposit of Hajj Pilgrimage Cost and/or Special Hajj Pilgrimage Cost;

b. value of the hajj financial benefits in the form of income from hajj finance development;

c. efficiency funds for hajj pilgrimage costs;

d. endowment funds of Muslims; and/or e. other legitimate and non-binding sources.

(2) For the receipt of Hajj Fund Management Agency in the form of:

(16)

a. deposit funds for Hajj Pilgrimage Cost and/or Special Hajj Pilgrimage Cost as referred to in paragraph (1) letter a; and

b. income from hajj finance development as referred to in paragraph (1) letter b in certain financial sectors or instruments,

shall be exempted from the object of Income Tax.

(3) The income from hajj finance development in certain financial sectors or instruments as referred to in paragraph (2) letter b shall be in the form of:

a. returns from giro, deposit, certificate of deposit, and savings with banks in Indonesia that implement business activities based on the sharia principles, as well as sharia securities issued by Bank Indonesia;

b. returns from sharia bonds (sukuk), government sharia securities, and sharia treasury notes the trading of which is traded and/or reported in the stock exchange in Indonesia;

c. dividend that originates domestically as well as from overseas or other income in the form of income after tax or income the tax of which is exempted or subject to tax of 0% (zero percent) of a permanent establishment as well as not through a permanent establishment overseas;

d. portion of profit that is received or earned from the participation unit of a collective investment contract that may be in the form of returns from sharia mutual funds, collective investment contract of asset-backed securities, collective investment contract of real estate investment trust, collective investment contract of infrastructure investment trust, and/or similar collective investment contract based on the sharia principles;

and/or

e. sales of investment in the form of gold bar or gold account that is managed by a sharia financial institution,

in accordance with the provisions of laws and regulations.

(4) Further provisions regarding deposit funds for Hajj Pilgrimage Cost and/or Special Hajj Pilgrimage Cost and income from hajj finance development in certain financial sectors or instruments that is received by the Hajj Fund Management Agency and exempted from the object of Income Tax as referred to in paragraph (2) shall be regulated in a Ministerial Regulation.

CHAPTER IV

COSTS THAT CAN BE DEDUCTED FROM GROSS INCOME

Part One

Promotion and Sales Costs Article 18

(17)

(1) The amount of taxable income for domestic Taxpayers and permanent establishments shall be determined based on gross income less the costs to obtain, collect, and maintain the income, including promotion and sales costs.

(2) The promotion and sales costs that may be deducted from gross income as referred to in paragraph (1) must take into account the followings:

a. to maintain and/or increase the sales;

b. spent reasonably; and

c. according to the good merchant customs.

(3) Further provisions regarding promotion and sales costs that may be deducted from gross income as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Part Two

Receivables That Are Actually Uncollectible Article 19

(1) Receivables that are actually uncollectible that can be charged as costs in calculating taxable income must meet the following requirements:

a. having been charged as costs in the commercial income statement;

b. Taxpayer must hand over the list of receivables that are actually uncollectible to the Directorate General of Taxes; and

c. for the receivables that are actually uncollectible:

1. the collection case has been handed over to the District Court or government agency in charge of state receivables;

2. there is a written agreement regarding write-off of receivables/exemption of debts between creditor and debtor concerned;

3. it has been published in the general or special publication; or 4. there is acknowledgement from the debtor that the debts has

been annulled for certain amount of debt.

(2) The requirements as referred to in paragraph (1) letter c shall not apply to receivables that are actually uncollectible to small debtors and other small debtors.

(3) Further provisions regarding procedures for charging receivables that are actually uncollectible as costs in the calculation of taxable income as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Part Three

Formation or Accumulation of Reserve Funds

(18)

Article 20

(1) To determine the amount of taxable income for domestic Taxpayers and permanent establishments, the formation or accumulation of reserve funds cannot be deducted from gross income.

(2) Excluded from the provision as referred to in paragraph (1) shall include:

a. uncollectible receivable reserve for the business of bank and other business entity that distributes credit, finance lease, consumer finance company, and factoring company that is calculated based on the applicable financial accounting standards with certain limitation after coordinating with the Financial Services Authority;

b. reserve for insurance business, including reserve for social assistance that is established by the Social Security Administrator;

c. guarantee reserve for the Indonesia Deposit Insurance Corporation;

d. reserve for reclamation costs for mining business;

e. reserve for replanting costs for forestry business; and

f. reserve for closing and maintenance costs of an industrial waste disposal facility for industrial waste treatment business,

which meet certain requirements.

(3) Provisions regarding the formation or accumulation of reserve funds that may be deducted from gross income and meets certain requirements as referred to in paragraph (2) shall be regulated in a Ministerial Regulation.

CHAPTER V

DEPRECIATION OF TANGIBLE ASSETS AND/OR AMORTIZATION OF INTANGIBLE ASSETS

Article 21

(1) Depreciation of expenses for the purchase, establishment, addition, repair, or alteration of tangible assets, except for land with the status of right of ownership, right to build, right to cultivate, and right to use, owned and used to obtain, collect, and maintain income that has a useful life of more than 1 (one) year shall be carried out in equal parts during the useful life that has been determined for the asset.

(2) The depreciation of expenses for tangible assets as referred to in paragraph (1) other than building, may be also carried out in the decreasing parts during the useful life, which is calculated by applying the depreciation rate to the residual book value, and at the end of useful life the residual book value is depreciated at once, provided that it is carried out in accordance with the principles.

(3) To calculate the depreciation as referred to in paragraph (1) and paragraph (2), the useful life and depreciation rate of tangible assets shall be set forth as follows:

(19)

Group of Tangible Assets Useful Life Depreciation Rate as referred to in

Paragraph (1) Paragraph (2) I. Non-Building

Group 1 4 years 25% 50%

Group 2 8 years 12.5% 25%

Group 3 16 years 6.25% 12.5%

Group 4 20 years 5% 10%

II. Building

Permanent 20 years 5%

Non-Permanent 10 years 10%

(4) The depreciation of tangible assets as referred to in paragraph (1) and paragraph (2) shall start in the month of performance of expenditure, except:

a. for tangible assets that are still in the workmanship process, starting in the month of completion of workmanship of the assets;

b. for tangible assets that have not been used or producing, starting in the month of the assets are used to obtain, collect, and maintain the income or in the month of the assets concerned are starting to produce, with the approval of the Director General of Taxes; or

c. for tangible assets that are owned and used in certain business fields.

(5) If a permanent building as referred to in paragraph (3) has a useful life of more than 20 (twenty) years, the depreciation as referred to in paragraph (1) shall be carried out in equal parts with the useful life:

a. of 20 (twenty) years; or

b. in accordance with the actual useful life based on the bookkeeping of Taxpayer, provided that it is carried out in accordance with the principles.

(6) A Taxpayer that has undergone depreciation to the permanent building as referred to in paragraph (5):

a. that is owned and used prior to Tax Year 2022; and

b. is depreciated in accordance with the useful life as referred to in paragraph (5) letter a,

may choose to carry out depreciation in accordance with the useful life as referred to in paragraph (5) letter b by submitting notification to the Director General of Taxes no later than the end of Tax Year 2022.

(7) Depreciation of tangible assets that are owned and used in certain business fields shall be set forth separately, including at the start of the depreciation as referred to in paragraph (4) letter c.

(8) In the event of transfer or withdrawal of assets in connection with insurance reimbursement, the total residual book value shall be charged as a loss and the total insurance reimbursement that is received or earned is recorded as income in the Tax Year:

(20)

a. of the occurrence of withdrawal of assets; or

b. of receiving the output of insurance reimbursement if the total output of insurance reimbursement to be received can only be known with certainty at a later date, with the approval of the Director General of Taxes.

(9) Upon expenditures for the reparation of tangible assets, having a useful life of more than 1 (one) year, the calculation of depreciation shall be regulated separately.

(10) Further provisions regarding:

a. group of tangible assets, useful life, and calculation of depreciation as referred to in paragraph (3);

b. the start of the depreciation as referred to in paragraph (4);

c. depreciation of permanent building as referred to in paragraph (5);

d. procedures for submission of notification as referred to in paragraph (6);

e. depreciation to the tangible assets that are owned and used in certain business fields as referred to in paragraph (7);

f. charging of loss and bookkeeping for income due to insurance reimbursement as referred to in paragraph (8); and

g. depreciation on expenditures for the reparation of tangible assets as referred to in paragraph (9),

Article 22

(1) Amortization on expenditures to obtain intangible assets and other expenditures including renewal fee for right to build, right to cultivate, right to use, and goodwill that has a useful life of more than 1 (one) year and used to obtain, collect, and maintain income, shall be carried out in accordance with the group of intangible assets, useful life, and rate of amortization that is carried out in equal parts or the decreasing parts as regulated in Article 11A paragraph (2) of the Law on Income Tax.

(2) The amortization as referred to in paragraph (1) shall start in the month of carrying out the expenses, except for certain business fields.

(3) If the intangible assets has a useful life of more than 20 (twenty) years, the amortization as referred to in paragraph (1) shall be carried out in accordance with the useful life of:

a. intangible assets in group 4 (four) as referred to in Article 11A paragraph (2) of the Law on Income Tax; or

b. in accordance with the actual useful life based on the bookkeeping of Taxpayer,

(21)

provided that it is carried out in accordance with the principles.

(4) A Taxpayer that has carried out amortization of intangible assets as referred to in paragraph (3):

a. that are owned and used prior to Tax Year 2022; and

b. amortized in accordance with the useful life as referred to in paragraph (3) letter a,

may choose to carry out the amortization in accordance with the useful life as referred to in paragraph (3) letter b by submitting notification to the Director General of Taxes no later than the end of Tax Year 2022.

(5) Further provisions regarding:

a. calculation of amortization as referred to in paragraph (1);

b. the start of the amortization for certain business fields as referred to in paragraph (2);

c. amortization of intangible assets that have a useful life of more than 20 (twenty) years as referred to in paragraph (3); and

d. procedures for the submission of notification as referred to in paragraph (4),

CHAPTER VI

TAX TREATMENT FOR THE REIMBURSEMENT

OR COMPENSATION IN THE FORM OF IN KIND AND/OR ENJOYMENT Part One

Reimbursement or Compensation in the Form of In Kind and/or Enjoyment Constitutes the Object of Income Tax for the Recipient

and Deduction of Gross Income for the Provider Article 23

(1) Reimbursement or compensation in the form of in kind and/or enjoyment shall constitute the object of Income Tax as referred to in Article 4 paragraph (1) letter a of the Law on Income Tax.

(2) The costs for reimbursement or compensation provided in the form of in kind and/or enjoyment in relation to the work or service may be deducted from the gross income to determine the taxable income by an employer or provider of compensation or reimbursement in the form of in kind and/or enjoyment as long as constituting the costs to obtain, collect, and maintain the income.

Part Two

Reimbursement or Compensation in the Form of In Kind and/or Enjoyment Exempted from the Object of Income Tax

for the Recipient

(22)

Article 24

Exempted from the object of Income Tax on the reimbursement or compensation in relation to the work or service received or earned in the form of in kind and/or enjoyment as referred to in Article 23 paragraph (1) shall include:

a. foods, food ingredients, beverage ingredients, and/or beverages for all Employees;

b. in kind and/or enjoyment provided in a certain region;

c. in kind and/or enjoyment that must be provided by an employer in the implementation of work;

d. in kind and/or enjoyment that originates or financed by state revenues and expenditures budget, regional revenues and expenditures budget, and/or village revenues and expenditures budget; or

e. in kind and/or enjoyment with certain type and/or limitation.

Article 25

The foods, food ingredients, beverage ingredients, and/or beverages for all Employees as referred to in Article 24 letter a shall include:

a. food and/or beverage provided by an employer in the workplace;

b. food and/or beverage coupon for Employees which due to the nature of their work are not able to utilize the provision of food and/or beverage as referred to in letter a, including Employees in the marketing division, transportation division, and other outstation service; and/or

c. food ingredients and/or beverage ingredients for all Employees with certain value limitation.

Article 26

(1) The in kind and/or enjoyment that is provided in a certain region as referred to in Article 24 letter b shall include facility, infrastructure, and/or facilities at the work location for Employees and their families in the form of:

a. residence, including housing;

b. health services;

c. education;

d. worship;

e. transportation; and/or

f. sports excluding golf, motorboat race, horse racing, paragliding, or automotive sport, as long as the business location of employer obtains determination of certain region from the Director General of Taxes.

(23)

(2) The utilities, infrastructure, and facilities at the work location for Employees and their families in the form of transportation as referred to in paragraph (1) letter e shall include transportation for Employees and their families in implementing the assignment.

(3) The certain region as referred to in Article 24 letter b shall include a region that is economically having potentials and feasible to be developed, however, the condition of economic infrastructure in general is less adequate and difficult to reach by public transportation, whether by land, sea, as well as air, so that to change the available economic potentials into an actual economic strength, investors bear quite high risks and return period that is relatively longer, including a sea area that has depth of more than 50 (fifty) meters with the seabed having mineral reserves, including remote regions.

Article 27

(1) The in kind and/or enjoyment that must be provided by an employer in the implementation of work as referred to in Article 24 letter c shall include in kind and/or enjoyment in relation to the requirements regarding security, health, and/or safety of Employees that are obligated by a ministry or institution based on the provisions of laws and regulations.

(2) The in kind and/or enjoyment that must be provided by an employer in the implementation of work in relation to the requirements regarding security, health, and/or safety of Employees that are obligated by a ministry or institution based on the provisions of laws and regulations as referred to in paragraph (1) shall include:

a. uniforms;

b. equipment for occupational safety;

c. shuttle facility for Employees;

d. lodging for ship crews and the kind; and/or

e. in kind and/or enjoyment that is received in the context of handling an endemic, pandemic, or national disaster.

Article 28

Exemption from the object of Income Tax for the reimbursement or compensation in the form of in kind and/or enjoyment with certain type and/or limitation as referred to in Article 24 letter e and food ingredients and/or beverage ingredients for all Employees with certain value limitation as referred to in Article 25 letter c shall take into account:

a. the type and/or value of the reimbursement or compensation in the form of in kind and/or enjoyment that is received; and/or

b. criteria of recipient of the reimbursement or compensation in the form of in kind and/or enjoyment.

Part Three

Assessment of In Kind and/or Enjoyment

(24)

Article 29

The reimbursement or compensation in the form of in kind and/or enjoyment that is received or earned in relation to the work or service as referred to in Article 23 paragraph (1) shall be assessed with the following provisions:

a. for the reimbursement or compensation in the form of in kind, namely based on the market value; and/or

b. for the reimbursement or compensation in the form of enjoyment, namely based on the total costs incurred or should be incurred by the provider.

Article 30

An employer or provider of reimbursement or compensation in the form of in kind and/or enjoyment shall be obligated to carry out withholding of Income Tax in accordance with the provisions of laws and regulations in the field of taxation.

Article 31 Provisions regarding:

a. procedures for granting exemption from the object of Income Tax for the reimbursement or compensation in relation to the work or service received or earned in the form of in kind and/or enjoyment that is provided in a certain region as referred to in Article 26;

b. certain value limitation as referred to in Article 25 letter c and certain type and/or limitation of in kind and/or enjoyment that is exempted from the object of Income Tax as referred to in Article 28; and

c. procedures for assessment and calculation of reimbursement or compensation in the form of in kind and/or enjoyment as referred to in Article 29,

CHAPTER VII

INSTRUMENTS FOR PREVENTION OF TAX EVASION Article 32

(1) The Minister shall be authorized to prevent tax evasion practices as an effort that is carried out by a Taxpayer to reduce, avoid, or postpone the payment of tax that should be payable and contrary to the purpose and objective of the provisions of laws and regulations in the field of taxation.

(2) The prevention of tax evasion practices as referred to in paragraph (1) shall be carried out by:

a. determining the moment dividend is received and the basis for the calculation by a domestic Taxpayer on capital participation in a business entity overseas other than a business entity that sells its shares at the stock exchange;

(25)

b. re-determining the amount of income and reduction as well as determine the debt as capital to calculate the amount of taxable income that is carried out by the Director General of Taxes by applying the Arm’s Length Principle;

c. determining the party carrying out the purchase of shares or assets of the company through another party or entity that is established for such purpose as long as there is irregularity in the pricing;

d. determining the party carrying out the sales or transfer of shares of an intermediate company that is established or domiciled domestically that provides tax protection;

e. re-determining the amount of income obtained by a domestic individual Taxpayer from an employer that transfers the entire or partial income domestic individual Taxpayer into the form of costs or other expenses paid to a company that is not established and not domiciled in Indonesia;

f. re-calculating the tax that should be payable based on the comparison of financial performance with a Taxpayer in similar business activities against the Taxpayer reporting the operating profits that are too small compared to the financial performance of another Taxpayer in a similar business field or reporting operating losses improperly although the Taxpayer has carried out commercial sales for 5 (five) years and reports fiscal loss for 3 (three) consecutive years;

g. setting the limits on the amount of borrowing costs that can be charged for the purpose of tax calculation; and/or

h. re-calculating the amount of tax that should be payable by not imposing the payment made by a domestic Taxpayer to a foreign Taxpayer as income-reducing costs resulting from the utilization of difference in tax treatment of an instrument or entity that may have more than one characteristic in the country or jurisdiction where the Taxpayer is domiciled.

(3) The mechanism of prevention of tax evasion practices as referred to in paragraph (2) letter a up to letter f may be only carried out to transactions between the parties affected by a special relationship.

(4) In the event that there are tax evasion practices as referred to in paragraph (1) that cannot be prevented using the mechanism regulated in paragraph (2), the Director General of Taxes may re-determine the amount of tax that should be payable by referring to the principle of recognition of economic substance above the formal form.

Article 33

(1) The special relationship as referred to in Article 32 paragraph (3) shall be a condition of dependence or attachment of one party to another that is caused by:

a. ownership or capital participation;

b. control; or

(26)

c. consanguine or affinal family relationship,

which results in one party being able to control the other party or not being independent in running a business or carrying out activities.

(2) The special relationship due to ownership or capital participation as referred to in paragraph (1) letter a shall be considered existing in the event that:

a. a Taxpayer has direct or indirect capital participation of not less than 25%

(twenty-five percent) in another Taxpayer; or

b. relationship between a Taxpayer with the lowest participation of 25%

(twenty-five percent) in 2 (two) Taxpayers or more or relationship between 2 (two) Taxpayers or more the latter.

(3) The special relationship due to control as referred to in paragraph (1) letter b shall be considered existing in the event of:

a. one party controls another party or one party is controlled by another party, directly and/or indirectly;

b. two parties or more are under the control of the same party directly and/or indirectly;

c. one party controls another party or one party is controlled by another party through management or use of technology;

d. the same person is directly and/or indirectly involved or participated in managerial or operational decision-making in two parties or more;

e. the parties are commercially or financially acknowledged or stating themselves in the same business group; or

f. one party states itself having a special relationship with another party.

(4) The special relationship due to the consanguine or affinal family relationship as referred to in paragraph (1) letter c shall be considered existing in the event that there is a family relationship whether consanguine as well as affinal in the first degree straight and/or lateral lineage.

Article 34

(1) The Minister shall be authorized to determine the time of obtaining a dividend and the basis for calculation by a domestic Taxpayer for capital participation in a business entity overseas other than a business entity that sells its shares at the stock exchange as regulated in Article 32 paragraph (2) letter a with the following provisions:

a. the amount of capital participation of the domestic Taxpayer is not less than 50% (fifty percent) of the total paid-up shares; or

b. together with other domestic Taxpayers having capital participation not less than 50% (fifty percent) of the total paid-up shares.

(27)

(2) The determination of time of obtaining a dividend by a domestic Taxpayer for capital participation in a business entity overseas as referred to in paragraph (1) shall be set forth at the end of the fourth month after the expiration of time limit of the obligation of submission of Annual Tax Return for a business entity overseas for the corresponding Tax Year.

(3) In the event that the business entity overseas as referred to in paragraph (1) does not have any obligation of submission of Annual Tax Return or there is no provision on time limit of submission of Annual Tax Return, the time of obtaining a dividend as referred to in paragraph (2) shall be set forth at the end of the seventh month after the corresponding Tax Year expires.

(4) Further provisions regarding procedures for determination of time of obtaining a dividend and the basis for calculation by a domestic Taxpayer for capital participation in a business entity overseas other than a business entity that sells its shares at the stock exchange as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 35

(1) A Taxpayer that carries out a transaction with a party that is affected by a special relationship as referred to in Article 33 paragraph (1) shall be obligated to apply the Arm’s Length Principle.

(2) A transaction that is affected by a special relationship as referred to in paragraph (1) shall include:

a. affiliated transaction; and/or

b. transaction that is carried out between parties not having any special relationship but the affiliated party of one or both parties in the transaction determine the counterparty and transaction price.

Article 36

(1) The Director General of Taxes shall be authorized to re-determine the amount of income and/or deduction to calculate the amount of taxable income in the event that a Taxpayer:

a. does not apply the Arm’s Length Principle as referred to in Article 35 paragraph (1);

b. applies the Arm’s Length Principle as referred to in Article 35 paragraph (1) but not in accordance with the applicable provisions; and/or

c. determines the Transfer Pricing not meeting the Arm’s Length Principle as referred to in Article 35 paragraph (1).

(2) The re-determination of the amount of income and/or deduction as referred to in paragraph (1) shall be carried out by determining the Transfer Pricing in accordance with the Arm’s Length Principle to calculate the amount of taxable income.

(3) The determination of Transfer Pricing in accordance with the Arm’s Length Principle as referred to in paragraph (2) shall be carried out by using:

(28)

a. price comparison method between independent parties;

b. resale price method;

c. cost-plus method; or d. other methods.

(4) The other methods as referred to in paragraph (3) letter d shall be, among other things:

a. profit-sharing method;

b. transactional net profit method;

c. independent transaction comparison method;

d. method in the assessment of tangible assets and/or intangible assets; or e. method in business assessment.

(5) The use of methods as referred to in paragraph (3) and paragraph (4) shall be selected based on the accuracy and reliability of the respective method for a transaction that is affected by a special relationship.

(6) Difference between the value of transaction that is affected by a special relationship and not in accordance with the Arm’s Length Principle with the value of transaction that is affected by a special relationship and in accordance with the Arm’s Length Principle as referred to in paragraph (2) shall be the form of indirect distribution of profits to the affiliated entity so that it is treated as a dividend that is subject to Income Tax in accordance with the provisions of laws and regulations in the field of taxation.

Article 37

Further provisions regarding application of Arm’s Length Principle as referred to in Article 32 paragraph (2) letter b, Article 35 paragraph (1), and Article 36 paragraph (1) shall be regulated in a Ministerial Regulation.

Article 38

(1) A Taxpayer that purchases shares or assets of the company through another party or entity that is established for such purpose as referred to in Article 32 paragraph (2) letter c can be determined as the actual party carrying out the purchase in the event that that the Taxpayer concerned has a special relationship with the other party or entity and there is an irregularity in pricing.

(2) The shares or assets of the company as referred to in paragraph (1) shall be in the form of:

a. shares or assets previously owned and/or guaranteed by a domestic Taxpayer that is determined as the party that actually carries out the purchase, in relation to a debt agreement; or

(29)

b. assets constituting credit assets (receivables) to a domestic Taxpayer that is determined as the party that actually carries out the purchase, in relation to a debt agreement.

(3) The party or entity that is established for the purpose of carrying out the purchase of shares or assets of the company as referred to in paragraph (1) shall be the party or entity that does not have any business substance and it is established by a domestic Taxpayer with the aim of purchasing the shares or assets of another domestic Taxpayer.

Article 39

(1) The sales or transfer of shares of an intermediate company established or domiciled domestically that provides tax protection and has a special relationship with the entity established or domiciled in Indonesia or permanent establishment in Indonesia as referred to in Article 32 paragraph (2) letter d may be set forth as sales or transfer of shares of the entity established or domiciled in Indonesia or permanent establishment in Indonesia.

(2) The income from the sales or transfer of shares as referred to in paragraph (1) shall be deducted by Income Tax of 20% (twenty percent) from the estimated net income.

Article 40

(1) Re-determination of the amount of income obtained by a domestic individual Taxpayer in relation with the work, activity, or service from an employer that has a special relationship with a company overseas as referred to in Article 32 paragraph (2) letter e shall be carried out with due observance of the fair income level that should be obtained by the individual Taxpayer concerned.

(2) Further provisions regarding re-determination of the amount of income obtained by a domestic individual Taxpayer as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 41

(1) Re-calculation of tax that should be payable based on the comparison of financial performance with a Taxpayer in similar business activities as referred to in Article 32 paragraph (2) letter f shall be carried out to a Taxpayer that has carried out commercial sales for 5 (five) years and report fiscal loss for 3 (three) consecutive years.

(2) Further provisions regarding comparison of financial performance with a Taxpayer in similar business activities in the context of calculation of tax that should be payable as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 42

(1) The limitation of amount of borrowing cost that can be charged for the purpose of tax calculation as referred to in Article 32 paragraph (2) letter g shall be carried out by the Minister using:

(30)

a. method of determining a certain level of comparison between debt and capital;

b. method of determining a certain percentage of borrowing cost compared to operating income before deducted by borrowing cost, Income Tax, depreciation, and amortization; or

c. other methods.

(2) Provisions regarding determination and procedures for the application of use of method for limiting the amount of borrowing cost as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 43

(1) A payment that is made by a domestic Taxpayer to a foreign Taxpayer cannot be charged as costs that deduct the income as referred to in Article 32 paragraph (2) letter h in the event that the payment:

a. is not counted as income of foreign Taxpayer that is subject to tax in the country or jurisdiction where the foreign Taxpayer is domiciled; or

b. is charged as deduction of income of foreign Taxpayer in the country or jurisdiction where the foreign Taxpayer is domiciled,

causing the intended payment to be not subject to tax or subject to low tax in Indonesia as well as in the country or jurisdiction where the foreign Taxpayer is domiciled.

(2) Provisions regarding the payment made by a domestic Taxpayer to a foreign Taxpayer that cannot be charged as costs as referred to in paragraph (1) shall be regulated in a Ministerial Regulation.

Article 44

(1) The implementation of prevention of tax evasion practices as referred to in Article 32 paragraph (4) shall be carried out by re-determining the amount of tax that should be payable with due observance of the:

a. limits of author