The Top-up Tax Trap During Profit Crises: Corporate Anticipation of GloBE Rules in Indonesia

Introduction and the Paradox of Losses in the GloBE Regime

Among practitioners and Chief Financial Officers (CFOs), there is a common misconception that a consolidated loss in a given jurisdiction will automatically exempt a Multinational Enterprise (MNE) Group from the radar of the Global Minimum Tax. Conventional domestic taxation logic indeed dictates that a negative fiscal profit means zero corporate income tax. However, the GloBE architecture encapsulated in PMK 136/2024 operates with a far more extensive logic to prevent base erosion in the future.

Within the GloBE framework, if the aggregate calculation of Constituent Entities in a country or jurisdiction results in a Net GloBE Loss, then the Effective Tax Rate (ETR) for that jurisdiction mathematically does not need to be calculated. This is considering the basic formula for ETR is dividing the Adjusted Covered Taxes by the Net GloBE Income. With the denominator being a negative value, the ETR test becomes irrelevant.

Paradoxically, the absence of this ETR calculation does not close the door for the Indonesian tax authority to collect top-up taxes. Instead, a tax base protection mechanism is automatically activated through an instrument called the Additional Current Top-up Tax, as mandated by Article 31 of PMK 136/2024.

Understanding the Additional Current Top-up Tax

The purpose of Article 31 of PMK 136/2024 is to prevent GloBE Taxpayers from deriving a "double benefit" from permanent differences. These permanent differences—such as income excluded from local tax objects or super deduction incentives—often magnify the domestic fiscal loss on the local Corporate Income Tax Return beyond the real economic loss recognized as a GloBE Loss.

If the local fiscal loss enlarges, the company will record a correspondingly large Deferred Tax Asset (DTA). When the company returns to profitability in the future, this excessively large DTA will be reversed, creating a deferred tax expense that will artificially inflate the company's Covered Taxes, thereby raising their ETR and shielding them from Top-up Taxes.

To break this avoidance scheme, PMK 136/2024 forces the MNE Group to instantly neutralize the "excess" Deferred Tax Asset in the year the loss occurs, which is billed in the form of the Additional Current Top-up Tax. The calculation involves the following precise steps:

• Calculating the Expected Adjusted Covered Tax Amount: Calculated by multiplying the Minimum Rate (15%) by the Net GloBE Loss of that jurisdiction. The result is an absolute negative figure expected by the GloBE standard.
• Evaluating the Actual Covered Taxes: Taxpayers must look at the factual Adjusted Covered Taxes. Is the value less than zero and mathematically smaller (more negative) than the Expected Adjusted Covered Tax Amount?
• Executing the Top-up Tax: If yes, the difference between the Expected Adjusted Covered Tax and the factual Covered Tax is legally converted into a payable Additional Current Top-up Tax.

Comprehensive Simulation Based on the Appendix of PMK 136 (The Naya Co Case)

To provide legal certainty and tactical guidance, we are obliged to refer to the official government illustration in the Appendix of PMK 136 of 2024 Section T Number 6.

The Naya Co Case Facts:

• Naya Co is a Constituent Entity (GloBE Taxpayer) of an MNE Group operating exclusively in the Indonesian jurisdiction (Jurisdiction A in the appendix). The domestic Corporate Income Tax rate is 15% (to simplify the recasting illustration).
• In Year 1, Naya Co records a total income of EUR 100 and total expenses of EUR 220.
• Based on the GloBE calculation, this Entity experiences a Net GloBE Loss of (EUR 100).
• However, for Indonesian domestic tax purposes, out of the EUR 100 total income, there is an equity gain of EUR 20 which is excluded from the tax object (constituting a permanent difference).
• Due to this tax-exempt income, Naya Co's domestic fiscal loss swells to (EUR 120).

Additional Current Top-up Tax Calculation Steps:

• Recording Actual Covered Taxes: Based on the fiscal loss (EUR 120), Naya Co records a Deferred Tax Asset (DTA) for accounting purposes equal to the Nominal Rate multiplied by the loss: 15% x (EUR 120) = (EUR 18). This value is classified as the (actual) Adjusted Covered Taxes.
• Calculating the GloBE Expectation (Expected Adjusted Covered Tax Amount): Based on Article 31, the expected amount is merely the Minimum Rate multiplied by the GloBE Loss: 15% x (EUR 100) = (EUR 15).
• Executing the Difference: There is a discrepancy where the factual DTA (EUR 18) holds a more negative value compared to the GloBE expectation limit (EUR 15). The difference of EUR 3 (derived from the calculation (EUR 15) - (EUR 18)) is automatically established as the Additional Current Top-up Tax.

Mitigation Strategy 1 - Excess Negative Tax Expense Carry-forward

The obligation to pay cash taxes when the company's cash flow is negative certainly triggers severe liquidity (cash flow) turmoil. Responding to massive protests from the global business community, the OECD Inclusive Framework released a simplification policy outlined in the FAQs on Model GloBE Rules April 2026.

This permanent solution is called the Excess Negative Tax Expense Carry-forward procedure. Through this mechanism, MNE Groups are no longer required to instantly remit the cash amount of EUR 3 (referring to the Naya Co example above) in the year the loss occurs. As a safeguard alternative, GloBE Taxpayers can make an election to record this excess negative difference (Expectation (EUR 15) vs. Actual (EUR 18)) as a carry-forward compensation attribute.

Operational Mechanism According to PER-6/PJ/2026:

This EUR 3 Excess Negative Tax Expense Carry-forward attribute will continuously be carried forward to subsequent GloBE Fiscal Years. When Naya Co recovers and books a profit, this carried-forward attribute will be used as a reduction against the Adjusted Covered Taxes in that profitable year. Consequently, Naya Co's Effective Tax Rate (ETR) in the profitable year will be suppressed downwards, which ultimately triggers the imposition of the Top-up Tax in the future when the company already has the liquidity capacity to pay. This election is formally accommodated for reporting in Appendix III Section B of the DMTT Annual Income Tax Return in Indonesia.

Mitigation Strategy 2 - GloBE Loss Election

If the jurisdiction where the GloBE Taxpayer operates does not have a Corporate Income Tax system, has an income tax rate below the Minimum Rate, or fundamentally does not apply deferred tax accounting, then the utilization of Deferred Tax Assets becomes impossible.

To overcome this vacuum, Article 35 of PMK 136/2024 facilitates the GloBE Loss Election. This mechanism creates a fictitious deferred tax attribute to balance the GloBE system.

Implementation Procedure of Article 35 PMK 136/2024:

• Election and Activation: The Reporting Constituent Entity must file this election in the first Fiscal Year the MNE Group operates in that jurisdiction. This election functions as a total replacement for the conventional mechanism handling temporary differences (Article 34 of PMK 136/2024).
• Forming Fictitious DTA: When a Net GloBE Loss occurs in that jurisdiction, the Taxpayer is permitted to establish a GloBE Loss Deferred Tax Asset whose value is absolutely calculated by multiplying the Net GloBE Loss by the Minimum Rate (15%).
• Compensation (Carry-Forward): This GloBE Loss DTA balance is retained and can be compensated against the amount of Covered Taxes in consecutive subsequent Fiscal Years, with a maximum time limit of 5 (five) years from the year the balance was obtained.
• Utilization: At the time the jurisdiction returns to booking a Net GloBE Income, this GloBE Loss DTA attribute must be used for an amount that is the lower of: (a) the result of multiplying the Net GloBE Income by the 15% Minimum Rate, or (b) the remaining available balance of the GloBE Loss DTA.
• Exceptions: It must be emphasized that this facility does not apply universally. Article 35 paragraph (10) strictly prohibits the use of the GloBE Loss Election in countries or jurisdictions that apply an eligible distribution tax system.

Compliance Administration through PER-6/PJ/2026

The complexity of calculating the Additional Current Top-up Tax or the utilization of Excess Negative Tax Expense will culminate in reporting compliance in Indonesia. The Directorate General of Taxes manages its execution precisely through the Director General of Taxes Regulation Number PER-6/PJ/2026.

Every GloBE Taxpayer in Indonesia entangled in this loss mechanism must translate their calculations into the electronic form of the DMTT Annual Income Tax Return (or the GloBE Annual Income Tax Return for the UPE), with the following disclosure structure:

• Appendix III Subsection E.1: Specifically designated to report the definitive figure of the Additional Current Top-up Tax for Constituent Entities in Indonesia. The EUR 3 figure from the Naya Co case will end up in this row.
• Appendix III Subsections B.1 and B.2: Designated to report the Adjusted Covered Taxes as well as the balance of the Excess Negative Tax Expense Carry-forward from the year prior to the GloBE Fiscal Year, the value generated in the current year, and the remaining value carried forward to the following year.
• Main Return Section III.4: On the Main form, the nominal Additional Current Top-up Tax (extracted from Appendix III) will be summed with the regular Top-up Tax to determine the total aggregate Top-up Tax (DMTT) payable in Indonesia.
• The Cash Payment Paradox: Even if the company is at a loss, the GloBE Taxpayer remains subject to Article 20 of PER-6/PJ/2026, which mandates the remittance of the Top-up Tax to the state treasury in Rupiah currency no later than the end of the GloBE Tax Year (December 31 of the following year), the due date of which precedes the submission of the final DMTT Annual Income Tax Return form on April 30 (or June 30 during the transition period).

Conclusion and Governance Recommendations

The Global Minimum Tax era obliterates the illusion that a red-inked income statement frees multinational groups from tax obligations. As evidenced by Article 31 of PMK 136/2024, distortions caused by permanent differences that inflate Deferred Tax Assets will be instantly intercepted by the authority through the imposition of the Additional Current Top-up Tax.

Executives and Chief Financial Officers must transform their corporate data governance. The synchronization between commercial bookkeeping, deferred tax recording according to PSAK 212, as well as the deferred tax recasting system at a 15% rate for GloBE purposes (dual ledger system) is an absolute necessity. The utilization of the Excess Negative Tax Expense Carry-forward based on the 2026 OECD updates must become a standard option activated in the filling of the DMTT Annual Income Tax Return to secure the company's liquidity (cash flow) when situated at the nadir of losses. Failure to map and execute this complex tax administration will not only trigger sanctions from the Indonesian tax authority (DJP) but will also shatter the MNE Group's compliance structure at the global level.

Regulatory References:

• Minister of Finance Regulation (PMK) Number 136 of 2024 (Article 31, Article 34, Article 35, Appendix Section T Number 6).
• Director General of Taxes Regulation Number PER-6/PJ/2026 (Article 20, Appendix III Sections B and E).
• OECD Model GloBE Rules (Pillar Two).
• FAQs on Model GloBE Rules April 2026 (Excess Negative Tax Expense Carry-forward).