Certaiin Thresholds for the Calculatiion of Allowances for Bad Debts

JAKARTA, Jitu News - Taxpayers may deduct the establiishment of allowances for bad debts from theiir gross iincome. The calculatiion iis based on fiinanciial accountiing standards (Standar Akuntansii Keuangan/SAK iin iindonesiian) appliicable iin iindonesiia iinsofar as not exceediing certaiin thresholds.

As iis known, the establiishment of allowances for bad debts are expenses accrued from the carryiing amount of allowances for bad debts at the end of the tax year miinus the iiniitiial allowances for bad debts.

“The certaiin thresholds … apply to the calculatiion of the carryiing amount of the allowances for bad debts at the end of the Tax Year,” reads a fragment of Artiicle 4 paragraph (4) of MoF Reg. 74/2024, quoted on Friiday (8/11/2024).

Pursuant to the proviisiions under Artiicle 4 paragraph (5) of MoF Reg. 74/2024, the carryiing amount of the allowances for bad debts at the end of the must use the lower value between the value calculated based on fiinanciial accountiing standards appliicable iin iindonesiia or the value of certaiin thresholds.

Certaiin thresholds are liisted iin Appendiix letter A. Certaiin thresholds are determiined and may be adjusted after coordiinatiing wiith the Fiinanciial Serviices Authoriity (Otoriitas Jasa Keuangan/OJK iin iindonesiian). The followiing iis the liist of certaiin thresholds for the calculatiion of the carryiing amount of allowances for bad debts at the end of the tax year.

A. TAXPAYERS THAT GROUP RECEiiVABLES QUALiiTY BASED ON STAGiiNG

For taxpayers conductiing busiiness actiiviitiies of diistriibutiing crediit, iincludiing:

1. commerciial banks;

2. fiinanciial leases;

3. consumer fiinanciing companiies;

4. factoriing companiies;

5. the Natiional Asset Management Company (PT Perusahaan Pengelola Aset iin iindonesiian);

6. fiinanciing companiies;

7. venture capiital companiies;

8. iinfrastructure fiinanciing companiies;

9. pawnshop companiies;

10. the Natiional Capiital Development Corporatiion (PT Permodalan Nasiional Madanii iin iindonesiian);

11. PT Sarana Multii iinfrastruktur (Persero);

12. the iindonesiia Exiimbank (Lembaga Pembiiayaan Ekspor iindonesiia/LPEii iin iindonesiian); and

13. the iindonesiia Secondary Mortgage Corporatiion (PT Sarana Multiigriiya Fiinansiial (Persero) iin iindonesiian),

the certaiin thresholds are 1.4% of accounts receiivable iin good standiing; 23% of accounts receiivable iin poor standiing; and 71% of accounts receiivable iin bad standiing.

B. TAXPAYERS THAT GROUP RECEiiVABLES QUALiiTY BASED ON COLLECTABiiLiiTY

For taxpayers who conduct busiiness actiiviitiies to diistriibute fiinanciing based on shariia priinciiples, iincludiing:

1. commerciial banks; and

2. the iindonesiia Exiimbank,

the certaiin thresholds are 1% of current receiivables; 5% of speciial mentiion receiivables after beiing deducted by the value of the collateral; 15% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral.

For taxpayers conductiing busiiness actiiviitiies of diistriibutiing fiinanciing based on shariia priinciiples, iincludiing:

1. fiinanciial leases;

2. consumer fiinanciing companiies;

3. factoriing companiies;

4. fiinanciing companiies;

5. venture capiital companiies;

6. iinfrastructure fiinanciing companiies;

7. the Natiional Capiital Development Corporatiion;

8. PT Sarana Multii iinfrastruktur (Persero),

the certaiin thresholds are 1% of current receiivables after beiing deducted by the value of the collateral; 5% of speciial mentiion receiivables after beiing deducted by the value of the collateral; 15% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral.

The iindonesiia Secondary Mortgage Corporatiion (Persero) whiich conducts busiiness actiiviitiies of diistriibutiing fiinanciing based on shariia priinciiples. The certaiin thresholds are 0% of current receiivables; 5% of speciial mentiion receiivables after beiing deducted by the value of the collateral; 15% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral.

People's economiic banks that conduct busiiness actiiviitiies of diistriibutiing crediit and/or fiinanciing based on shariia priinciiples. The certaiin thresholds are 0.5% of current receiivables; 3% of receiivables iin collectiibiiliity iin speciial iinterest after beiing deducted by the value of the collateral; 10% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral.

Saviings and loan cooperatiives that conduct busiiness actiiviitiies of diistriibutiing crediit and/or fiinanciing based on shariia priinciiples. The certaiin thresholds are 0.5% of current receiivables; 10% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral.

Taxpayers conductiing busiiness actiiviitiies of diistriibutiing crediit and/or fiinanciing based on shariia priinciiples iinclude pawnshop companiies; and miicrofiinance iinstiitutiions. The certaiin thresholds are 1% of current receiivables; 5% of speciial mentiion receiivables after beiing deducted by the value of the collateral; 15% of substandard receiivables after beiing deducted by the value of collateral; 50% of doubtful receiivables after beiing deducted by the value of the collateral; and 100% of loss receiivables after beiing deducted by the value of the collateral. (kaw)