Indonesia has closed a long-standing gap in fiscal accounting. Under Article 20A of Government Regulation (PP) No. 20 of 2026, which amends PP No. 55 of 2022 on Income Tax Adjustments, expenses in the form of bribes and gratuities may no longer be charged as costs to earn, collect, and maintain income. In practice, such expenses cannot be used to reduce gross income when calculating Income Tax.
PP 20/2026 was enacted on 22 April 2026. Before this rule, the prohibition could be inferred from the general principles of Articles 6 and 9 of the Income Tax Law, but no article named bribes and gratuities explicitly. This dedicated provision is the key change.
What Article 20A Regulates
The new provision states that expenses in the form of bribes, gratuities, and/or other gifts in any name or form, as defined under corruption and bribery criminal law, cannot be charged as costs (Article 20A of PP No. 20 of 2026). As a result, these expenses fall into the category of non-deductible expenses.
In other words, a company that books such spending as an operating cost will face a positive fiscal correction during tax calculation. Taxable income rises, and the tax payable increases accordingly.
Domestic and Foreign Coverage
A key point: the prohibition is not limited to payments to domestic public officials. The government considered it necessary to affirm that bribery-related costs paid to public officials, whether at home or abroad, are not expenses that may reduce the tax base.
This cross-jurisdiction scope matters for companies with international operations or transactions. Informal payments to foreign officials remain non-deductible under Indonesian tax rules.
Aligned With International Standards
The government frames this provision as part of aligning with international standards, including recommendations from the Organisation for Economic Co-operation and Development (OECD). The OECD urges member states to adopt explicit rules denying deductibility of bribe expenses as a tool to prevent cross-border corruption.
The move brings Indonesia in line with jurisdictions that have long included similar prohibitions in their income tax laws.
What Taxpayers Should Note
For corporate taxpayers, the rule demands care in expense classification. Spending that may qualify as a bribe or gratuity must not be treated as a deductible fiscal cost. Internal finance and tax functions should ensure bookkeeping policy aligns with Article 20A of PP No. 20 of 2026.
The clarification also sharpens the legal position: bribe expenses are not merely ethically questionable, they are firmly rejected as a deduction from gross income under applicable tax rules.
For a broader view of non-deductible expense categories, see the Tax Guide on non-deductible costs under Article 9 of the Income Tax Law.