Decree 71 concerning receivables, issued by the Indonesian Directorate General of Taxes, provides a mechanism for taxpayers to write off bad debts, reducing their taxable income. A simplified example would be a company unable to collect payment from a client despite reasonable collection efforts. This uncollectible amount, after meeting specific criteria, can be recognized as a loss.
This regulation offers significant advantages for businesses operating in Indonesia. It allows for more accurate profit reporting by acknowledging genuine losses from uncollectible debts. This, in turn, contributes to a fairer tax burden for businesses. Historically, managing bad debts presented a challenge for businesses, impacting their profitability and tax liabilities. This decree provides a clear legal framework to address this issue, offering a more stable and predictable business environment.