Successfully Separated Investment and Premium Costs, Insurance Company Annuls Hundreds of Billions in Proportional Cost Correction

The substantial dispute in Tax Court Decision Number PUT-012530.15/2019/PP/M.XVIIIB Tahun 2025 involving PT AALI explicitly highlights the complexity of Joint Cost deductibility for companies generating both Final (Investment) and Non-Final (Premium) income. The Taxpayer successfully demonstrated compliance with the separate bookkeeping obligation under Article 27 paragraph (1) of Government Regulation (PP) Number 94 Year 2010, which mandates that deductible costs must be clearly identifiable. The Directorate General of Taxes (DGT) insisted that all costs should be allocated proportionally based on gross income (Article 27 paragraph (2) of PP 94/2010) under the premise that the Taxpayer did not perform adequate separation of records.

Core Conflict: Separate Bookkeeping vs. Proportional Allocation

PT AALI, as an insurance entity, structurally possesses two primary income sources with different Corporate Income Tax (CIT) treatments: income from premiums (Non-Final) and income from investment yields (Final). During the trial, PT AALI presented strong supporting evidence, including Internal Memos and Board of Directors’ Decisions that explicitly governed the allocation and separation of cost centers for each division. This documentation convinced the Panel of Judges that the corrected costs (Business Expenses and Non-Business Expenses) were proven not to be used jointly for both types of income.

Legal Consideration and Resolution

In its legal consideration, the Panel of Judges definitively ruled that the proportional correction made by the DGT was irrelevant. Article 27 paragraph (2) of PP 94/2010 can only be applied if the Taxpayer is genuinely unable to identify or separate costs incurred to generate Final and Non-Final income. Since PT AALI had met the requirement for separate bookkeeping and was able to demonstrate a clear basis for identification, the Panel cancelled the DGT’s correction. The implication of this decision reaffirms that the enforcement of Article 27 paragraphs (1) and (2) of PP 94/2010 heavily depends on the quality and consistency of the Taxpayer's internal documentation, simultaneously setting a positive precedent for financial sector Taxpayers dealing with diverse income and cost structures.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here