Non-Deductible Expense
A non-deductible expense is spending that tax rules do not allow to be deducted from gross income when calculating Income Tax. The official list sits in Article 9 paragraph (1) of Law No. 36 of 2008 (the Income Tax Law), as last amended by Law No. 7 of 2021 (HPP). Examples include profit distributions or dividends, costs for the personal benefit of shareholders, Income Tax itself, and tax administrative penalties in the form of interest, fines, and surcharges. Since Article 20A of Government Regulation No. 20 of 2026 took effect, bribe and gratuity costs are also confirmed as non-deductible. Because these costs are not recognized as deductions, their value must be added back as a positive fiscal correction, making taxable income higher than commercial profit.
This article is for education, not tax advice.
Example
A company pays a tax administrative fine of IDR 10,000,000. As a non-deductible expense (Article 9(1)(k) of the Income Tax Law), the fine cannot reduce gross income and must be added back as a positive correction when computing tax payable.
Source: Article 9(1) of Law No. 36 of 2008 (Income Tax) as amended by Law No. 7 of 2021 (HPP); Article 20A of PP No. 20 of 2026
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