Jakarta, Ideatax -- In the previous article, we have discussed a lot about joint operation and joint venture. We have also discussed the income that is subject to final and non-final Income Tax.
To complete the discussion in the previous article, we will discuss about joint costs in this article. Joint costs are costs incurred in the context of obtaining, collecting, and maintaining an income but their nature cannot be separated in calculating taxable income. Thus, to calculate taxable income, it is necessary to charge joint costs proportionally.
Joint cost is regulated in Government Regulation Article 27 Number 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year. It states that taxpayers must conduct separate bookkeeping if they have a business which income is subject to final and non-final Income Tax. Additionally, taxpayers must also conduct separate bookkeeping if they receive or obtain income that is or is not a tax object. Or, taxpayers receive and do not receive tax facilities in the form of tax holidays as stipulated in Article 31A of the Income Tax Law.
In the explanation of Government Regulation Article 27 No. 94/2010, it is stated that separate bookkeeping is a recording process carried out regularly by separating records for each transaction, income, and costs between business activities subject to final and non-final income tax, as well as between income that is a tax object and that is not a tax object.
As mentioned earlier, to calculate the amount of taxable income, joint costs are charged proportionally. Thus, joint costs are charged in accordance with the proportion of final and non-final income earned, the proportion of income that is the object and not the object of tax, and the proportion of income that obtains facilities of 31A or not.
For example, ABC Inc is a construction services company subject to Final Income Tax. In addition to earning final income, ABC Inc also earns non-final income from leasing heavy equipment. In 2020, ABC Inc earned a taxable income of IDR 1 billion derived from final income of IDR 700 million and non-final income of IDR 300 million.
ABC Inc is unable to segregate the costs incurred in obtaining, collecting, and maintaining its income. In 2020, the total shared cost after fiscal adjustment is IDR 500 million. Therefore, ABC Inc should charge the joint costs proportionally as follows:
- Cost to earn final income = (7/10) * IDR 500 million = IDR 350 million
- Cost to obtain non-final income = (3/7) * IDR 500 million = IDR 150 million
Furthermore, the cost to obtain non-final income of IDR 150 million can be used to calculate taxable income by deducting non-final income of IDR 300 million. Thus, the amount of taxable income subject to Income Tax Article 17 is IDR 150 million.
- Law number 7 of 1983 concerning Income Tax as amended by Law number 7 of 2021 concerning Harmonization of Tax Regulations
- Government Regulation Number 94 of 2010 concerning Calculation of Taxable Income and Repayment of Income Tax in the Current Year
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