Calculation of Deductible Borrowing Costs (Attachment 11B) in Corporate Annual Income Tax Return in Coretax

1. Introduction

In the Indonesian tax landscape, one of the crucial instruments to prevent tax avoidance practices through excessive debt financing schemes (thin capitalization) is the limitation of borrowing costs that can be claimed as a fiscal cost (deductible expense).

With the implementation of the Core Tax Administration System (Coretax), this reporting and calculation mechanism undergoes significant digitalization. Corporate Taxpayers no longer perform manual calculations on non-standardized working papers but must fill out Attachment 11B (Lampiran 11B). This attachment is designed to calculate the reasonableness of debt through the Debt to Equity Ratio (DER) and determine the amount of interest that can be deducted from gross income.

This article will thoroughly explore the filling procedures, system calculation logic, and case illustrations based on the latest regulation PER-11/PJ/2025 and Coretax technical provisions.

2. Legal Basis and Regulatory References

This calculation process is based on the following legal frameworks:

1. Minister of Finance Regulation Number 169/PMK.010/2015: Regarding the Determination of the Ratio between Debt and Company Capital for Income Tax Calculation Purposes. This regulation sets the allowable DER limit at a maximum of 4:1.
2. Government Regulation Number 55 of 2022: Regulating adjustments in the Income Tax sector, including the authority of the Minister of Finance to limit borrowing costs through DER or EBITDA methods.
3. Director General of Taxes Regulation Number PER-11/PJ/2025: Regarding the Form, Content, and Procedure for Filling the Annual Income Tax Return. This specifically designates Attachment 11B as the standard form for calculating borrowing costs in Coretax.

3. Structure of Attachment 11B in Coretax

In the Coretax system, Attachment 11B appears automatically (default) for Corporate Taxpayers, except for those whose entire income is subject to Final Income Tax (such as MSMEs under PP 55). This attachment consists of three main parts:

Part I: EBITDA Calculation

This section is prepared to accommodate the borrowing cost limitation method based on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

• Data such as Commercial Net Income, Depreciation, and Tax Expenses will be filled automatically (prepopulated) from Attachment 1 (Financial Statements) and the Master SPT.
• Important Note: Given that the derivative technical regulations regarding the EBITDA limit have not been fully mandatorily implemented to replace DER in this transitional tax year, Coretax allows Taxpayers to fill Part I with the figure 0 (zero) if technical provisions have not yet been issued.

Part II: Debt to Equity Ratio (DER) Comparison

This is the core of the calculation. The system will calculate the average debt and equity balance for each month.

• Sub-Part A (Average Debt Balance): Taxpayers must detail each lender, input the debt balance at the end of each month (January to December), and the system will calculate the average.
• Sub-Part B (Average Equity Balance): Taxpayers fill in the equity balance (stocks, retained earnings, interest-free loans from affiliates) at the end of each month, and the system calculates the average.
• Sub-Part C (DER Ratio): The system automatically divides Total Average Debt by Total Average Equity. If the result exceeds 4:1, there will be an automatic fiscal correction in Part III.

Part III: Calculation of Borrowing Costs

In this section, Taxpayers calculate how much interest expense is deductible.

• The system will compare the actual DER with the maximum DER (4:1).
• If actual DER > 4:1, then the deductible borrowing cost must be calculated proportionally.

4. Filling Exceptions

Not all Corporate Taxpayers are required to apply the 4:1 DER provision. Based on PMK 169/2015 and Coretax guidelines, detailed filling of Parts II and III is exempted for:

• Taxpayer Banks.
• Financing Institutions.
• Insurance and Reinsurance.
• Taxpayers in the mining sector (with specific provisions in their contracts).
• Taxpayers whose entire income is subject to Final Income Tax.
• Taxpayers engaged in the infrastructure sector.

For the Taxpayers above, Attachment 11B still appears, but the filling is adjusted (usually DER is not calculated or deemed compliant).

5. Calculation Case Illustration

To understand the Coretax algorithm logic, let's use the following case study.

Case Scenario: PT Manufaktur Sejahtera
Status: Manufacturing Company (Subject to 4:1 DER).
Tax Year: 2025.
Debt Data: Has an interest-bearing loan from Parent Co of IDR 50,000,000,000 (IDR 50 Billion) which is stable throughout the year. The loan interest for 2025 is IDR 5,000,000,000 (10%).
Equity Data: Paid-up capital and retained earnings average IDR 10,000,000,000 (IDR 10 Billion) a year.

Manual Analysis:

• Average Debt: IDR 50 Billion.
• Average Equity: IDR IDR 10 Billion.
• Actual DER: 50 B : 10 B = 5 : 1.
• Allowed DER Limit: 4 : 1.
• Allowed Debt: 4 x Equity = 4 x IDR 10 B = IDR 40 Billion.
• Deductible Borrowing Cost: (IDR 40 B / IDR 50 B) x IDR 5 Billion = IDR 4,000,000,000.
• Fiscal Correction (Non-Deductible): IDR 5 B - IDR 4 B = IDR 1,000,000,000.

Here is how to fill it in Attachment 11B in Coretax:

Table 1: Illustration of Filling Part II (DER) in Coretax

Table 2: Illustration of Filling Part III (Borrowing Costs) in Coretax

Implication:
The value of IDR 1,000,000,000 (Non-Deductible Borrowing Cost) will become a Positive Fiscal Correction increasing the Taxable Income in the Master SPT. Taxpayers must ensure this figure is consistent with the fiscal reconciliation in Attachment 1.

6. Tips and Critical Filling Points

To ensure the reporting process in Coretax runs smoothly and avoids administrative sanctions or audits, pay attention to the following:

• Consistency with Attachment 1 (P&L): Ensure the total "Borrowing Cost (Interest)" input in Attachment 11B Part III matches the total Interest Expense recorded in Attachment 1. Data discrepancies can trigger validation errors or risk flags.
• Interest-Free Loans from Affiliates: If the company receives interest-free loans from shareholders meeting Article 18 UU PPh requirements, these loans should be categorized as Capital in Part II.B, not Debt. This helps lower the DER ratio (increasing the equity denominator).
• Foreign Creditors: If one of the lenders is a private foreign party, after filling Attachment 11B, you are required to fill Attachment 11C (Report on Private Offshore Debt). At the bottom of Attachment 11B, there is a confirmation question: "Do you have private offshore debt?" If answered Yes, access to Attachment 11C opens.
• Monthly Details: Coretax requires monthly balance input (Jan-Dec). Taxpayers are advised to prepare a working paper in Excel containing month-end balances for each debt and equity account before starting data entry to speed up the process.
• Automatic Validation: The Coretax system has mathematical validation. You cannot claim deductible interest greater than the allowable capital proportion (4:1). If you force an input exceeding the formula, the system will likely reject it or mark it as an anomaly.

7. Conclusion

Attachment 11B in Coretax shifts the compliance paradigm from merely reporting total interest to transparently detailing the capital structure. This feature forces Taxpayers to be disciplined in calculating their DER ratio annually. With an integrated system, the DGT can automatically detect potential thin capitalization. Therefore, the accuracy of debt-receivable balance data and understanding of DER regulations (PMK-169/2015) are keys to successful Corporate Annual SPT reporting in the Coretax era.

References:

• PER-11/PJ/2025 regarding the Form, Content, and Procedure for Filling the Annual Income Tax Return.
• PMK 169/PMK.010/2015 regarding the Determination of the Ratio between Debt and Company Capital.
• PP 55 of 2022 regarding Adjustments in the Income Tax sector.