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Jakarta, Ideatax -- The Financial Services Authority (“OJK”) has declared that the credit restructuring related to Covid-19 will end in March 2024 (CNBC, 2023). OJK ensures it will not extend the credit restructuring policy after improving the financial industry's condition post-COVID-19. This is done because the economic conditions have shown a trend of improvement. According to OJK data, the number of credit restructurings related to COVID-19 decreased in the fourth quarter of 2023. In October 2023, for example, the number of credit restructurings related to COVID-19 was 301.98 trillion, which decreased by 15.83 trillion compared to the previous month (Bisnis Indonesia, 2023). The number of debtors receiving restructuring was also reduced. In October 2023, the number of customers receiving restructuring related to COVID-19 was 1.22 million customers or a decrease of 100,000 customers compared to the same period the previous month.
It is worth noting that credit restructuring is an improvement effort carried out in credit activities against debtors who potentially have difficulty in fulfilling their obligations. There are six credit restructuring policies in banking, including reducing the credit interest rate, extending the credit term, reducing the credit interest arrears, reducing the credit principal arrears, adding credit facilities, and converting credit into Temporary Capital Participation (OJK, 2024).
Furthermore, OJK (2024) explains that to apply for credit restructuring, several criteria must be met by customers, including the debtor has difficulty paying the principal and/or interest on the loan and the debtor has a good business prospect and is assessed to be able to fulfill obligations after the loan is restructured.
Regarding the high risk the banking and financing industry faces, the government has accommodated this by issuing Minister of Finance Regulation No. 81 of 2009 concerning the Formation or Cultivation of Reserve Funds that Can Be Reduced as Costs as amended by PMK 219 of 2012. Through these provisions, the Government regulates that the uncollectible receivables reserve for commercial banks that carry out business activities conventionally, commercial banks that carry out business activities based on Islamic principles, people's credit banks that carry out business activities conventionally, people's credit banks that carry out business activities based on Islamic principles can be reduced from gross circulation.
Along with the development of accounting principles and Financial Accounting Standards (“PSAK”), the provisions regulating the formation of reserves that can be charged have changed. From the change from PSAK 55 to PSAK 71, which initially adhered to the incurred loss principle to the expected loss/forward-looking concept, the Government feels the need to change PMK 81 of 2009.
Regarding the legal basis for this change, in Article 32C of the Income Tax Law, as last amended by the HPP Law, the Government regulates that the reserve for uncollectible receivables for bank businesses and other business entities that provide credit, lease with option rights, consumer finance companies, and factoring companies calculated based on applicable financial accounting standards with certain limitations after coordinating with the Financial Services Authority.
In addition, in Government Regulation Number 55 of 2022 concerning Adjustments to Regulations in the Field of Income Tax, the Government also regulates that provisions regarding the formation or cultivation of reserves that can be reduced from gross income that meet specific requirements are handled in Ministerial Regulations.
Based on the above, to provide legal certainty, justice, and convenience, and to align tax regulations with financial accounting standards in the calculation of uncollectible receivables reserve formation costs for bank businesses and other business entities that provide credit and/or financing for tax purposes, the Government held a public hearing to change PMK-81/PMK.03/2009 std. PMK-219/PMK.011/2012.
There are several changes in the RPMK, including those related to the taxpayers who can charge the uncollectible receivables reserve. In the current provisions, the charging of the uncollectible receivables reserve can only be done by eight corporate taxpayers, including Banks (commercial banks, Islamic commercial banks, people's credit banks, Islamic people's credit banks), Koperasi Simpan Pinjam (KSP), PT Perusahaan Pengelola Aset (PT PPA), PT Permodalan Nasional Madani (PT PNM), Lembaga Pembiayaan Ekspor Indonesia (LPEI), Perusahaan Pembiayaan Infrastruktur (PPI), Sewa Guna Usaha Hak Opsi (SGU), Perusahaan Pembiayaan Konsumen (PPK) dan PerusahaanAnjak Piutang (PAP)
In the latest RPMK, in addition to the eight types of taxpayers who have the right to apply for the uncollectible receivables reserve, it is expanded by adding venture capital companies, pawnshops, microfinance institutions, and secondary housing finance companies with the condition of being registered and obtaining a license from the OJK.
In addition, the RPMK related to uncollectible receivables reserves also clarifies the definition of receivables objects that can be reserved. In the current provisions, there are only the phrases "receivables" and "credits" without any descriptions or explanations regarding further scope. In the RPMK that will be enforced, the provisions regarding "receivables" and "credits" are clarified by emphasizing that only loans (credit) and/or financing, including those organized based on Islamic principles. Not all financial assets are on the taxpayer's balance sheet.
The most significant difference in the RPMK formation of reserve funds is related to the details of the reserve percentage. The existing provisions regulate that the reserve percentage is divided into five layers with a size of 1% to 100%. In the latest provisions, the percentage of reserve funds is divided into three layers with a size of 1.4% to 71% as follows:
|
No |
Existing Regulations |
RPMK |
|
Details of Reserve Percentage |
Collectibility 1 (current): 1% Collectibility 2 (in special attention): 5% Collectibility 3 (less recent): 15% Collectibility 4 (doubtful): 50% Collectibility 5 (bad): 100% |
Stage 1 (good): 1.4% Stage 2 (less good): 23% Stage 3 (bad): 71% |
Regarding recognition, the RPMK related to the formation of uncollectible receivables reserves explains that receivables that cannot be collected are calculated as a reduction in the initial reserves, not as a separate expense. Furthermore, the RPMK also regulates that the repayment of receivables that cannot be collected during the current tax year and received back in the same tax year is calculated as an increase in the initial reserves, not income.
That's a brief explanation regarding the draft ministerial regulation related to uncollectible receivables reserves. We hope that the RPMK will provide convenience and flexibility for taxpayers, especially banking and financing taxpayers, in carrying out their businesses.
References
Bisnis Indonesia. (2023, December 4). Restrukturisasi Kredit Covid-19 Berakhir Maret 2024, OJK Tak Akan Perpanjang Lagi. Retrieved from Bisnis Indonesia: https://finansial.bisnis.com/read/20231204/90/1720864/restrukturisasi-kredit-covid-19-berakhir-maret-2024-ojk-tak-akan-perpanjang-lagi
CNBC. (2023, Desember 4). Restrukturisasi Kredit Covid-19 Berhenti Maret 2024. Retrieved from CNBC: https://www.cnbcindonesia.com/market/20231204152055-17-494384/restrukturisasi-kredit-covid-19-berhenti-maret-2024
OJK. (2024, Feb 20). APA YANG DIMAKSUD DENGAN RESTRUKTURISASI KREDIT? Retrieved from OJK: https://sikapiuangmu.ojk.go.id/FrontEnd/CMS/Article/321
