Regulation of the Director General of Taxes Number PER-5/PJ/2026 Stipulates the Calculation of Taxable Income for Fiscal Year 2025 for Taxpayers in the Insurance Sector

Introduction 

On April 20, 2026, the Director General of Taxes (“DGT”) issued Regulation of the Director General of Taxes Number PER-5/PJ/2026 on the Regulation of the Director General of Taxes Number PER-5/PJ/2026 on the Recognition of Income and Expenses and Calculation of Taxable Income for Fiscal Year 2025 for Taxpayers Maintaining Bookkeeping Based on Financial Accounting Standards on Insurance Contracts (“DGT Regulation 5/2026”). DGT Regulation 5/2026 regulates the tax treatment for Taxpayers that maintain bookkeeping based on financial accounting standards for insurance contracts.

The revision to Statement of Financial Accounting Standards Number 117 (Pernyataan Standar Akuntansi Keuangan 117, “PSAK 117”) alters the principles of recognition, measurement, presentation, and disclosure of insurance contracts starting January 1, 2025. In line with the provision that bookkeeping follows applicable accounting standards unless stipulated otherwise in taxation, DGT Regulation 5/2026 stipulates the recognition of income and expenses and the calculation of Taxable Income for Fiscal Year 2025 for the relevant Taxpayers, while supporting the preparation of accountable and transparent financial statements for the tax authority.

Key Provisions 

Tax Subjects and Scope 

DGT Regulation 5/2026 applies to Taxpayers maintaining bookkeeping for insurance contracts based on financial accounting standards as stipulated in Article 2. This provision also covers Taxpayers that maintain bookkeeping for insurance contracts based on statutory provisions on the recognition of income and expenses related to insurance contracts.

Basis for Tax Recognition and Calculation 

Article 3 stipulates that Taxable Income is calculated from gross income minus expenses to earn, collect, and secure income. For Fiscal Year 2025, the recognition of income and expenses follows: 

1. Principles of recognition, measurement, presentation, and disclosure of insurance contracts under Statement of Financial Accounting Standards Number 117 on Insurance Contracts and/or statutory provisions regulating the recognition of income and expenses related to insurance contracts applicable in 2024; and 

2. Income Tax provisions applicable in 2025. 

Financial Statement Mechanisms and Reserve Funds 

Article 4 of DGT Regulation 5/2026 stipulates that the tax calculation for Fiscal Year 2025 is based on the 2025 financial statements prepared using Statement of Financial Accounting Standards Number 117 on Insurance Contracts and/or statutory provisions on the recognition of income and expenses related to insurance contracts applicable in 2024. In such calculation, Taxpayers may deduct the costs of establishing reserve funds in accordance with Regulation of the Minister of Finance Number 81/PMK.03/2009 on the Establishment or Accumulation of Reserve Funds Deductible as Expenses as amended by Regulation of the Minister of Finance Number 219/PMK.011/2012, under the following conditions: 

1. General Insurance: Includes a self-borne premium reserve of 40% of the total self-borne premiums received or obtained, and a self-borne claim reserve of 100% of the total claims agreed upon but unpaid and claims reported and currently being processed, excluding unreported claims.

2. Life Insurance: The premium reserve amount is determined based on actuarial calculations ratified by the Capital Market and Financial Institution Supervisory Agency (Badan Pengawas Pasar Modal dan Lembaga Keuangan) (whose functions are currently under the Financial Services Authority (Otoritas Jasa Keuangan, “OJK”)).

Reporting Obligations and Annual Tax Return Annexes 

For Taxpayers submitting financial statements to the OJK, the tax calculation is based on the financial statements submitted to the OJK. Article 4 paragraph (3) of DGT Regulation 5/2026 mandates that the 2025 Annual Income Tax Return be accompanied by the following annexes: 

1. Audited 2025 financial statements prepared using Statement of Financial Accounting Standards Number 117 on Insurance Contracts and/or statutory provisions regulating the recognition of income and expenses related to insurance contracts applicable in 2025; 

2. 2025 financial statements prepared using Statement of Financial Accounting Standards Number 117 on Insurance Contracts and/or statutory provisions regulating the recognition of income and expenses related to insurance contracts applicable in 2024; and 

3. Other supporting documents in accordance with tax provisions. 
   

Transitional Provisions 

Article 5 of DGT Regulation 5/2026 stipulates that the provisions on the recognition of income, expenses, and calculation of Income Tax apply for Fiscal Year 2025. Article 6 stipulates that DGT Regulation 5/2026 took effect on its date of issuance, namely April 20, 2026.

Closing

DGT Regulation 5/2026 regulates the recognition of income and expenses and the calculation of Taxable Income for Fiscal Year 2025 for Taxpayers maintaining bookkeeping for insurance contracts by referring to accounting principles applicable in 2024 and tax provisions applicable in 2025, with the calculation based on gross income minus expenses to earn, collect, and secure income, including the costs of establishing reserve funds in accordance with Regulation of the Minister of Finance Number 81/PMK.03/2009 as amended by Regulation of the Minister of Finance Number 219/PMK.011/2012. These reserve funds include a self-borne premium reserve of 40% of the total self-borne premiums received or obtained and a self-borne claim reserve of 100% of the total claims agreed upon but unpaid and currently being processed (excluding unreported claims) for general insurance, as well as premium reserves based on actuarial calculations ratified by the Capital Market and Financial Institution Supervisory Agency for life insurance. In addition, Taxpayers submitting financial statements to the Financial Services Authority are required to include audited 2025 financial statements based on PSAK 117 and financial statements prepared using accounting principles applicable in 2024 as annexes to the 2025 Annual Income Tax Return along with supporting documents in accordance with tax provisions, with limited applicability for Fiscal Year 2025 since April 20, 2026.