Whether Foreign Exchange Translation Loss Allowed in Indonesia Income Tax?

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Hitendra Agrawal (Querist)
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22 January 2024 Whether Foreign Exchange Translation Loss Allowed in Indonesia Income Tax? Please share the relevant act transcript.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 In Indonesia, the treatment of foreign exchange translation losses for income tax purposes is governed by the prevailing tax laws and regulations. Generally, foreign exchange losses can be deductible under certain conditions, particularly when they arise from transactions that are considered to be revenue in nature.

The relevant provisions can be found in Indonesia's Income Tax Law (Undang-Undang Pajak Penghasilan, or UU PPh). Specifically, regarding foreign exchange losses, the key sections to refer to are typically:

1. **Section 15(1)** of UU PPh: This section generally outlines the deductibility of expenses for income tax purposes, including losses incurred during the tax year.

2. **Ministry of Finance Regulation No. 234/PMK.03/2017**: This regulation provides more specific guidance on the treatment of foreign exchange gains and losses, including the conditions under which they are recognized for tax purposes.

It's important to note that the deductibility of foreign exchange translation losses can depend on several factors, including whether the losses are realized or unrealized, whether they arise from trading activities or other business transactions, and the specific circumstances of the taxpayer.

For precise and detailed information, it is advisable to consult with a tax advisor or a legal expert familiar with Indonesian tax laws. They can provide specific guidance tailored to your situation and ensure compliance with current regulations and interpretations by tax authorities in Indonesia.