Indonesia 鈥� New Implementing Regulation for Benefits-in-Kind

After much anticipation, Indonesia鈥檚 Minister of Finance has issued implementing regulations related to benefits-in-kind (鈥淏IK鈥�) in its regulation No. 66 Year 2023 (鈥淧MK-66鈥�) dated 27 June 2023.¹ 聽This became effective on 1 July 2023.

PMK-66 provides comprehensive guidelines on the tax treatment of BIK for employers and employees, encompassing aspects such as the deductibility of BIK expenses, the definition and scope of BIK as a taxable object, exclusion criteria for specific BIK categories, valuation and calculation methods for BIK, special considerations for certain areas, and transitional provisions.

PMK-66 also revokes PMK No. 167/PMK.03/2018 (鈥淧MK-167/2018鈥�),² which previously governed the provision of food and drinks for all employees as well as reimbursement or compensation in-kind and facilities in specific areas and related to the work performance, all of which can be deducted from an employer鈥檚 gross income for its corporate tax payable computation.

This GMS Flash Alert briefly highlights some of the key aspects of PMK-66.聽 For the full article, see "Implementing Regulation for Benefits-in-Kindopens in a new tab鈥� in TaxNewsFlash (August 2023), a publication of the 乐鱼（Leyu）体育官网 International member firm in Indonesia.

Why this matters

It is important that employers, tax professionals/service providers, and even employees, keep abreast of the rules under PMK-66 as they pertain to changes/updates to the tax treatment and compliance obligations in respect of categories of BIK that employers provide to their employees.

More Details

Here are some key points of PMK-66 with respect to deductibility of BIK expenses for employers.

BIK expenses can be deducted from gross income to determine taxable income if the following conditions are met:

BIK is related to expenses for obtaining, collecting, and maintaining income (鈥�3M鈥�).
BIK (in connection with work) is a cost related to the relationship between the employer and the employee.
BIK (in connection with services) is a fee because of the inter-taxpayer service transactions.

The technical provisions for charging BIK are as follows:

BIK with a useful life of more than one year is charged through depreciation or amortization.
BIK with a useful life of less than one year is charged in the year the expenditure is incurred.
Employers should report their BIK expenses in their Annual Income Tax Return.
Effective starting 1 January 2022, for employers whose 2022 financial year commenced before 1 January 2022.
Effective from the start of the 2022 financial year, for employers whose 2022 financial year commenced on 1 January 2022, or afterwards.

乐鱼（Leyu）体育官网 Insights

The scope of BIK covered under PMK-66 is broad and there are numerous exclusions from taxable income.聽 For the sake of clarity and to properly meet one's compliance obligations, it is recommended that employers consult with their qualified tax professionals.

The absence of a clear definition and scope for facilities included in the list of exemptions for BIK as taxable income may give rise to differing approaches and disagreements.

Contacts

Esther Kwok

Partner, Tax

乐鱼（Leyu）体育官网 in Indonesia

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Natalia Yamin

Director, GMS

乐鱼（Leyu）体育官网 in Indonesia

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Footnotes

¹聽聽Regulation No. 66 Year 2023 concerning Income Tax Treatment of Reimbursement or Compensation related to Employment or Services received or earned in the form of Benefit in Kind (鈥淧MK-66鈥�) /聽PERATURAN MENTERI KEUANGAN REPUBLIK INDONESIA NOMOR 66 TAHUN 2023. See (in Indonesian):聽听.

²聽 Regulation No.167/PMK.03/2018 with regard to the provision of BIK in Certain Areas /聽PERATURAN MENTERI KEUANGAN REPUBLIK INDONESIA NOMOR 167/PMK.03/2018.聽聽

RELATED RESOURCE

For prior coverage of the tax treatment of BIK in Indonesia, see GMS Flash Alert 2023-036opens in a new tab, 16 February 2023.

Disclaimer

The information contained in this newsletter was submitted by the 乐鱼（Leyu）体育官网 International member firm in Indonesia.

GMS Flash Alert聽is a Global Mobility Services publication of the 乐鱼（Leyu）体育官网 LLP Washington National Tax practice. The 乐鱼（Leyu）体育官网 name and logo are trademarks used under license by the independent member firms of the 乐鱼（Leyu）体育官网 global organization. 乐鱼（Leyu）体育官网 International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind 乐鱼（Leyu）体育官网 International or any other member firm vis-脿-vis third parties, nor does 乐鱼（Leyu）体育官网 International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

漏聽聽2024聽Siddharta Widjaja & Rekan 鈥� Registered Public Accountants, an Indonesian partnership and a member firm of the 乐鱼（Leyu）体育官网 global organization of independent member firms affiliated with 乐鱼（Leyu）体育官网 International Limited, a private English company limited by guarantee. All rights reserved.

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