Jakarta (VNA) - Indonesia plans to prolong its tax incentive schemes through 2026 to maintain its attractiveness to investors, while recalibrating the framework to comply with global minimum tax rules.
Director General of Fiscal and Economic Stability at the Finance Ministry Febrio Nathan Kacaribu said the extension is being prepared through a new ministerial regulation (PMK). The current tax holiday framework is governed by Finance Ministry Regulation (PMK) No. 69/2024, which expires in this month.
The new regulation will also be aligned with the global minimum tax regime agreed under the Organisation for Economic Co-operation and Development (OECD), which requires multinational companies to pay a minimum effective corporate tax rate of 15%.
Febrio said if Indonesia gives a full tax holiday, the company would pay the 15% tax to its country of origin. The government is therefore refining the incentive’s design to ensure it remains attractive to investors while complying with international tax commitments.The policy will continue in 2026, he said.
Under PMK No. 69/2024, the tax holiday grants corporate income tax reductions of up to 100% for domestic corporate taxpayers making new investments of at least 100 billion IDR (6 million USD). The incentive applies to investments in pioneer industries or in designated strategic locations such as Special Economic Zones (KEK) and Indonesia's future capital Nusantara (IKN) in East Kalimantan.
Pioneer industries include pharmaceuticals, electric vehicles, petrochemicals, robotics, and renewable energy. The tax exemption period ranges from five to 20 years, depending on the size of the investment, with larger investments qualifying for longer terms. After the tax holiday expires, companies are typically entitled to a 50 percent corporate income tax reduction for an additional two years.
The regulation currently applies to tax holiday approvals issued through December, which the government now plans to extend into 2026 through a new Finance Ministry Regulation./.
