A foreign-owned company in Indonesia generally keeps its bookkeeping in Indonesian rupiah (IDR). However, a foreign-owned limited liability company (PT PMA) is among the categories of taxpayers that can apply to maintain its books in English and US dollars (USD).
What Is the Default Bookkeeping Currency for a PT PMA?
Indonesia’s general tax rules require bookkeeping to be maintained in Bahasa Indonesia and IDR unless the taxpayer is permitted to use an alternative.
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A PT PMA can conduct transactions in foreign currencies while maintaining its books in IDR; the transaction currency does not determine the company’s bookkeeping currency.
Can a PT PMA Keep Its Books in US Dollars?
A PT PMA can apply to maintain its bookkeeping in English and USD. Indonesia’s tax rules expressly include taxpayers operating under the foreign investment framework among the taxpayers eligible to apply.
For an ordinary PT PMA, USD bookkeeping requires permission rather than simply an internal accounting decision. The notification procedure applies to specified categories, including certain mining and oil and gas taxpayers, rather than ordinary PT PMAs.
A qualifying company generally needs to submit its application no later than three months before the financial year in which English and USD bookkeeping will begin. A newly established taxpayer intending to use English and USD from its first tax year generally has three months from its establishment date to apply.
Once permitted, the company maintains its Indonesian tax bookkeeping in USD, including its assets, liabilities, equity, income, and expenses, rather than simply converting IDR accounts into USD for group reporting.
How Are Foreign-Currency Transactions Handled If the Books Are in IDR?
A PT PMA maintaining IDR books can still receive a shareholder loan in USD, purchase imported equipment in euros, pay an overseas service provider in Singapore dollars, or hold foreign-currency bank balances.
These transactions need to be translated into the company’s bookkeeping currency using the exchange rate applicable for the relevant accounting or tax purpose. Exchange-rate movements can subsequently produce foreign-exchange gains or losses when monetary balances are revalued or settled.
What If the PT PMA’s Functional Currency Is USD?
Functional currency reflects the primary economic environment in which a company operates rather than simply the currency preferred by its shareholders or overseas parent.
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Indonesia’s tax rules recognize taxpayers whose financial statements use USD as their functional currency under applicable Indonesian financial accounting standards as one of the categories that may apply to maintain English and USD bookkeeping.
Having USD as the functional currency does not itself replace the required tax procedure. A PT PMA must still follow the applicable process before maintaining its Indonesian tax books in USD.
Set Up Your Indonesian Bookkeeping with MAP Resources Indonesia
MAP Resources Indonesia can help your PT PMA determine whether to maintain its Indonesian books in IDR or apply to use USD, and ensure its bookkeeping is set up correctly from the outset. Contact us today at info@mapresourcesindonesia.com.
