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Indonesia reviews tax incentives to protect government revenue

Indonesia currently imposes a corporate income tax rate of 22% and has offered tax exemptions and reductions for years to attract investment in special economic zones and priority sectors.

Jakarta (VNA) – The Indonesian government is reviewing tax incentives in special economic zones (SEZs) to align with the global minimum tax regime, thereby preventing revenue losses while maintaining the country's attractiveness to foreign investors.

Susiwijono Moegiaharso, Secretary of the Indonesian Coordinating Ministry for Economic Affairs, said the review comes after Indonesia implemented the global minimum tax regime in 2025. Under the new regulations, multinational corporations with annual gross revenue of more than 750 million EUR (855.01 million USD) will be subject to a minimum corporate income tax rate of 15%, regardless of where they operate.

Indonesia currently imposes a corporate income tax rate of 22% and has offered tax exemptions and reductions for years to attract investment in special economic zones and priority sectors. However, if the effective tax rate paid by a business in Indonesia falls below 15% due to tax incentives, the difference may be collected by the country where the company's parent entity is headquartered under the global minimum tax mechanism.

Susiwijono emphasised the risk that tax revenue forgone through exemptions in Indonesia could instead be collected by other countries. Therefore, tax incentives will be re-evaluated based on their actual effectiveness in attracting investment, creating jobs, and promoting economic growth, rather than simply increasing the fiscal cost of tax incentives without delivering commensurate benefits.

The move comes as Indonesia faces pressure to increase budget revenue to meet public spending needs while maintaining its competitiveness in attracting foreign investment.

Indonesia currently has 25 special economic zones with cumulative investment exceeding 335 trillion IDR (18.8 billion USD), of which 82.6 trillion IDR was attracted in 2025 alone. Economic zones such as Kendal, Gresik, Galang Batang, and Sei Mangkei have become important centres for industrial development, processing, and exports in the country./.

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