If you’re a foreign or domestic investor looking to maximize fiscal benefits in Indonesia, a tax holiday can be your gateway. You may receive a corporate income tax exemption for as long as 20 years, provided you meet the criteria.This guide walks you through everything you need: eligibility requirements, timeline, and common mistakes to avoid.
Also read: Tax Holiday in Indonesia: A Comprehensive Guide for Foreign Investors
Eligibility Checklist
To be eligible for a tax holiday in Indonesia, your company must fulfill the following requirements:
Be a Legal Entity in Indonesia
Your company must be registered as a Perseroan Terbatas (PT) or foreign investment company (PT PMA).
Operate in a Pioneer Industry
Qualifying sectors include:
- Renewable energy
- Digital economy
- Automotive manufacturing
- Pharmaceuticals
- Upstream metal industries
The government publishes an updated list via Minister of Finance Regulation No. 130/2020.
Meet the Minimum Investment Value
| Investment Amount | Tax Holiday Period |
|---|---|
| IDR 500 billion – 1T | 5 years |
| IDR 1T – 5T | 7 years |
| IDR 5T – 15T | 10 years |
| Above IDR 30T | 20 years |
Investments below IDR 500 billion may receive a 50% reduction for 5 years.
Fulfill Financial Ratio (DER)
Your Debt-to-Equity Ratio (DER) must align with standards under PMK No. 169/PMK.10/2015.
Commitment to Timely Realization
Investment must be realized within 1 year of receiving tax holiday approval.
Application Timeline: Step-by-Step Guide via OSS
Register at OSS
Register your business and obtain a Business Identification Number (NIB).
Prepare Required Documents
Including:
- Business plan and feasibility study
- Shareholder and director ID/passport
- Financial projections
- DER calculations
- Proof of funding
Submit Online Application
Navigate to “Fasilitas” in OSS and choose “Tax Holiday.”
Verification Process
- BKPM checks completeness
- Ministry of Finance reviews eligibility
Optional Presentation
You may be invited to present your proposal directly to the Ministry of Investment.
Approval Issued
Decision is usually issued within 30 working days, though the full process can take 3–5 months.
Common Rejections and How to Avoid Them
| Cause of Rejection | Prevention Tip |
|---|---|
| Incomplete documentation | Double-check with a professional advisor |
| Misclassified industry sector | Confirm eligibility under current KBLI |
| Failure to meet DER or investment cap | Verify ratios and thresholds early |
| OSS registration errors | Ensure accuracy during OSS account setup |
| Application past allowed time | Apply within 1 year post-investment reg. |
Expert Tips
- Work with a local legal or tax advisor familiar with BKPM and OSS systems.
- Carefully prepare all required documents, especially your industry justification and detailed business plan.
- Use the “Fasilitas” menu in OSS to track your application and respond to any review queries fast.
- Consider KEK zones (Special Economic Zones) for extended incentives.
Securing a tax holiday in Indonesia can significantly boost your investment returns—but only if you meet the right criteria and follow the process carefully. Use the OSS platform wisely, verify your eligibility, and ensure full compliance with documentation. This is not just a tax break—it’s a strategic opportunity.
Rely on Investinasia’s tax consultants to take care of your taxes
Understanding Indonesia’s tax obligations can be challenging due to its evolving laws and policies. Foreign businesses and individuals often benefit from working with local tax consultants who offer expertise on regulatory compliance, tax calculations, and legal obligations.
Partnering with a reputable consultant like InvestinAsia’s Indonesia tax consultant and compliance services can simplify your tax management and ensure full compliance with Indonesian tax laws.
Our experienced team of professionals is ready to assist you in every tax matter, such as:
- Accounting and tax reporting services in Indonesia
- Indonesia Payroll Service
- Indonesia LKPM Reporting Service
- Indonesia VAT Taxpayers Registration
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FAQs
How long can a tax holiday last?
The tax holiday duration ranges from 5 to 20 years, depending on how much you invest.
What is considered a pioneer industry?
Industries that introduce innovation, use new technology, and provide high economic value—such as EV manufacturing, digital tech, and pharmaceuticals.
Can startups qualify for a tax holiday?
Yes, if they operate in KEK (Special Economic Zones) and meet the minimum investment and industry criteria.
Is the OSS system mandatory?
Yes, the OSS platform is the exclusive gateway for submitting tax incentive applications in Indonesia.
What if my application is rejected?
You can reapply, but must fix all deficiencies first. Consulting with a tax advisor is recommended.
