Reserves and provision are basically treated as non-deductible expenses, except in relation to the followings:
- Provisions for bad debt for banking businesses and other business enterprise that provide loans, financial lease, consumer finance, and factoring;
- Reserves for insurance business, including reserve for social security formed by Administering Social Security Agency (Badan Penyelenggara Jaminan Sosial);
- Reserves fund for Deposit Insurance Institution (Lembaga Penjamin Simpanan);
- Reserves for reclamation costs for mining companies;
- Reserves for re-planting costs for forestry businesses; and
- Reserves for cost of closing and maintenance a place for industrial waste disposal for industrial waste processing businesses.
A deposit of a certain amount placed with an Indonesian bank is required for mining, including oil and gas, businesses. The deposit is jointly controlled by the company and the government. Unless the money has been deposited, the reserves should not be treated as deductible expenses in calculating taxable income.