Government finally issues ruling on assets revaluation

JAKARTA (JP): The government issued yesterday its long-waited ruling on assets revaluation, which allows companies to revalue their fixed assets annually rather than quinquennially as previously governed.

This will enable troubled listed companies to pump up their capital base from asset revaluations to save them from being delisted from the local bourse.

Finance minister decree No. 304/KMK.04/1998, dated August 14, however, still requires corporations to pay 10 percent income tax on capital gains resulting from the revaluation of assets.

Many parties concerned, including the Association of Indonesian Publicly Listed Companies and even the market watchdog Bapepam, had been seeking government clearance to grant tax concessions on such capital gains.

The only leeway the ruling gives is that corporations which pursue mergers -- not only banks as previously ruled -- could spread the payment of the income tax over five years.

The head of the legal and public relations bureau at the Ministry of Finance, Hadiyanto, said companies wishing to revalue their assets must have settled all their tax obligations first.

Hadiyanto said the revaluation of fixed assets -- land, buildings and others -- should not done with the aim of selling the assets.

If the revalued assets are sold within five years of the revaluation, the sellers must pay 15 percent income tax, on top of the 10 percent capital gains tax.

Despite the imposition of the tax, analysts said the new ruling would allow financially troubled listed companies to avoid being axed from the stock exchange.

According to the existing stock market regulations, listed firms which suffered losses in the last three consecutive years or which book financial losses on their balance sheets that amount to half or more of their paid-up capital at the end of the latest year will be delisted.

Thirty-four companies currently listed on the Jakarta Stock Exchange have been threatened with delisting due to their poor financial positions.

Trimegah Securindo Lestari's research head, David Chang, said most companies were currently under-valued based on historical valuations of their assets on their balance sheets.

"For example, imported machinery is significantly more expensive now than before the rupiah's depreciation," Chang said.

The rupiah's 80 percent depreciation against the U.S. dollar over the past year has dragged many companies to the brink of insolvency and delisting, as their paid up capital has been severely eroded by foreign exchange losses. (rid)