PRACTICES OF INCOME TAX TREATMENT ON THE IMPLEMENTATION OF PSAK 73 LEASES

PSAK 73 Leases took effect on January 1, 2020 and have an effect on lessees'
asset and liability presentation. This study aimed to analyze the tax implication
these leases to contribute to tax policy recommendations. The regulations and
interview results with taxpayers, tax consultants, and regulators were examined.
The results showed that tax authority and taxpayers differed in understanding the
income tax treatment in PSAK 73 Lease implementation. Recognizing
depreciation and interest expense during lease measurement results in a number
of fiscal reconciliation choices, each of which results in a different taxable
income. Furthermore, the leases prompt additional debt and interest, affecting
Debt calculation to Equity Ratio (DER) as per tax provisions. The initial
recognition of liability and right-of-use assets is distinct from the tax base for
land/building leases under Income Tax Article 4 paragraph (2). The tax authority
should confirm the fiscal reconciliation done on PSAK 73 – a component of the
DER calculation as a result of its implementation - and regulate the gross lease,
which becomes the final tax base in Article 4 paragraph (2) of land/building
leases.