Tax Treatment of Interest‑Free Loans in Indonesia

The Directorate General of Taxes (DGT) has issued guidance on the tax treatment of interest‑free loans. The guidance applies to all taxpayers in Indonesia from 1 January 2025.

Under the Income Tax Law, an interest‑free loan is deemed to generate imputed interest (the interest that would have been payable) which is taxable income for the lender and a deductible expense for the borrower. The imputed rate is set using market rates or a method prescribed by the DGT, especially for related‑party transactions.

Consequently, taxpayers must calculate, report, and remit tax on the imputed interest to avoid penalties. The rule provides certainty for companies arranging internal financing and supports broader tax compliance.