Tax Incentives in Indonesia 2026: Key Benefits and Opportunities

Tax incentives for foreign investors in Indonesia are a set of fiscal facilities, including tax holidays, tax allowances, R&D super deductions, and VAT exemptions, granted under Ministry of Finance and Ministry of Investment regulations to companies that invest in priority sectors or designated zones. For 2026, the government has extended its tax holiday framework while redesigning parts of it to comply with the OECD’s 15% Global Minimum Tax. This guide walks through what is still available, what changed, and how to apply.

Is the Tax Holiday Still Available for Foreign Investors in 2026?

Yes. Indonesia’s corporate income tax (CIT) holiday remains active in 2026, though under a regulation the government is actively reworking. The current legal basis is Minister of Finance Regulation No. 69 of 2024, which amended PMK No. 130/2020 and extended the application window for tax holiday approvals. The Finance Ministry has since signaled that a new regulation will carry the facility forward through 2026, adjusted to fit the OECD’s global minimum tax rules rather than left unchanged.

Under the existing framework, qualifying new investments in pioneer sectors, such as upstream metals, petrochemicals, pharmaceuticals, and integrated digital infrastructure, can receive a 100% CIT exemption for five to twenty years, depending on investment size. Investments below IDR 500 billion receive a 50% reduction instead. Once the holiday period ends, companies typically get a further 50% CIT reduction for two additional years.

Minimum Investment and Sector Requirements

To qualify, a company generally needs to meet several conditions at once, not just clear the investment floor.

Capital threshold

New investments of at least IDR 500 billion qualify for the full 100% exemption; investments between IDR 100 billion and IDR 500 billion can still receive a partial reduction.

Pioneer sector classification

The business must fall within one of the designated pioneer industries listed under PMK No. 130/2020 as amended, covering sectors with high integration, high value-add, or new technology use.

Legal entity and timing

The applicant must be registered as a PT or PT PMA, and the investment plan must be realized within one year of approval.

Also read: Tax Holiday in Indonesia: A Comprehensive Guide for Foreign Investors

What Is the Difference Between a Tax Holiday and a Tax Allowance?

A tax allowance is a separate facility under Government Regulation No. 78 of 2019, designed for a wider range of sectors and investment sizes than the tax holiday. Rather than exempting income tax outright, it reduces net taxable income by up to 30% of the value invested in tangible fixed assets, spread over six years at 5% annually. It also includes accelerated depreciation and amortization, a reduced 10% withholding tax on dividends paid to non-resident shareholders, and an extended loss carryforward of up to 10 years instead of the standard 5.

The practical difference matters for planning: a tax holiday suits large, capital-intensive pioneer projects, while a tax allowance fits mid-sized or labor-intensive investments across 183 eligible business fields. A company cannot claim both for the same investment, so the choice depends on capital scale, sector, and how quickly the business expects to turn a taxable profit.

Also read: Tax Holiday vs Tax Allowance in Indonesia: What Investors Need to Know

What Is the Tax Incentive for R&D in Indonesia?

The R&D tax incentive in Indonesia is a super deduction that lets eligible taxpayers reduce gross income by up to 300% of qualifying research and development expenditure, established under Government Regulation No. 45 of 2019 and detailed in Minister of Finance Regulation No. 153/PMK.010/2020. In practice, this works in layers: a 100% ordinary deduction for the actual qualifying cost, plus an additional deduction of up to 200% based on further conditions, such as whether the R&D leads to a registered patent, plant variety protection right, or reaches commercialization.

The same regulatory framework offers a separate 200% deduction for qualifying vocational training expenses, often used alongside the R&D facility by manufacturers building both new technology and a skilled workforce. A company spending IDR 1 billion on qualifying R&D could, in principle, deduct up to IDR 3 billion when calculating taxable income.

One thing many foreign investors miss is how underused this incentive still is. According to the Ministry of Finance, only nine taxpayers had received the R&D super deduction as of mid-2025, out of 30 companies that submitted 224 proposals, largely because the documentation and research-partnership requirements are stricter than they first appear. Forming a formal collaboration with a local university or research institution tends to improve approval odds.

Also read: Understanding Indonesia’s Super Deduction Tax for R&D and Training

What Is the VAT Incentive in Indonesia?

A VAT incentive in Indonesia is a government measure that exempts or subsidizes Value Added Tax (PPN) on specific goods, services, or transactions to support affordability, exports, or investment in designated zones. Indonesia’s standard VAT rate sits at 12%, applied to an 11/12 tax base for most non-luxury goods and services, which produces an effective rate close to 11%.

Several VAT incentives apply on top of that baseline:

Strategic goods and services exemption

Basic necessities such as rice, eggs, meat, fresh vegetables, and fish remain VAT-exempt, alongside vaccines, religious textbooks, and goods related to disaster management.

Special Economic Zone (KEK) and bonded zone facilities

Deliveries of taxable goods and services within KEKs, bonded zones, and Free Trade Zones such as Batam, Bintan, and Karimun are exempt from VAT and Luxury Goods Sales Tax, which significantly lowers input costs for manufacturers and exporters.

Government-borne VAT (PPN DTP) on housing

Under Minister of Finance Regulation No. 90 of 2025, the government reinstated a 100% government-borne VAT facility for landed houses and apartments priced up to IDR 5 billion, with the subsidy applied to the portion of the price up to IDR 2 billion. Both Indonesian citizens and foreign nationals holding a valid KITAS or KITAP can use this facility for one property purchase, though it generally does not extend to a PT PMA buying property as a corporate asset.

For export-oriented businesses, machinery and raw materials imported for production can also receive full VAT exemption inside SEZs and bonded logistics zones, which is one reason export manufacturers frequently locate operations there rather than outside the zone system.

Also read: VAT Exemption in Indonesia: Key Policies and Implications

What Tax Incentives Exist in Special Economic Zones (KEK) and IKN?

Special Economic Zones (Kawasan Ekonomi Khusus, or KEK) and the new capital city, Nusantara (IKN), carry their own incentive layer on top of the national tax holiday and allowance schemes. Investors in KEKs can receive CIT reductions or exemptions for periods ranging from 10 to 20 years depending on the zone’s designated activity, combined with VAT and luxury goods tax exemptions and, in many zones, extended land use rights of up to 80 years.

IKN-based investors have access to a comparable package, including CIT exemptions for projects that establish headquarters or financial center operations in the new capital, alongside simplified dual licensing and longer land use rights designed to attract early movers into the region.

Also read: Indonesia’s Special Economic Zones (SEZs): A Complete Guide

How Does the Global Minimum Tax Affect Indonesia’s Tax Incentives in 2026?

Indonesia adopted the OECD/G20 Pillar Two Global Minimum Tax (GMT) through Minister of Finance Regulation No. 136 of 2024, effective from the 2025 fiscal year. The rule requires multinational enterprise groups with consolidated revenue above EUR 750 million to maintain an effective tax rate (ETR) of at least 15% in every jurisdiction where they operate, including Indonesia, through a Qualified Domestic Minimum Top-up Tax (QDMTT).

This directly affects how generous a tax holiday can be in practice. If Indonesia grants a full CIT exemption that pushes a multinational’s ETR below 15%, the shortfall does not disappear, it gets collected as a top-up tax, either by Indonesia itself through QDMTT or by the investor’s home jurisdiction. The government has acknowledged this trade-off publicly, which is the main reason the 2026 tax holiday extension is being redesigned rather than simply renewed as-is. For large multinational groups, this means the headline incentive numbers from 2024 and 2025 should be checked against current ETR planning before being treated as guaranteed savings. Mid-sized investors below the GMT revenue threshold are not affected and can generally still enjoy the full benefit under domestic rules.

Foreign investors structuring a new PT PMA around a tax holiday should treat corporate income tax planning and GMT exposure as one combined decision rather than two separate questions.

How Do Foreign Investors Apply for Tax Incentives in Indonesia?

Every tax holiday, tax allowance, and super deduction application runs through Indonesia’s Online Single Submission (OSS) system, the country’s centralized licensing and incentive platform.

Register the entity and obtain an NIB

The company must already hold a Business Identification Number (NIB) through OSS before applying for any fiscal facility, which means a PT PMA needs to be established first.

Select the relevant facility on OSS

From the OSS dashboard, the applicant chooses the specific incentive, tax holiday, tax allowance, R&D super deduction, or a KEK/IKN-specific facility, and submits the required investment plan, feasibility study, and sector classification (KBLI).

Joint review by BKPM and the Ministry of Finance

The Investment Coordinating Board (BKPM) and Ministry of Finance evaluate the application jointly, typically issuing a decision within 30 working days for straightforward cases, though the full process, including document preparation, often takes several months.

Also read: OSS in Indonesia: A Guide for Foreign Companies and How to Apply for Indonesia Investment Incentives via OSS

Setting up the right legal entity before applying matters more than most first-time investors expect. For companies still deciding on structure, InvestinAsia’s PT PMA registration service handles incorporation end-to-end, while the Indonesia tax consultant and compliance service manages the OSS application itself, from document preparation through to the BKPM and Ministry of Finance review.

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

Frequently Asked Questions

What is the tax incentive for R&D in Indonesia?

It is a super deduction under Government Regulation No. 45 of 2019 that allows eligible taxpayers to deduct up to 300% of qualifying R&D expenses from gross income, combining a 100% ordinary deduction with up to 200% in additional deductions tied to outcomes such as patents or commercialization.

What is the VAT incentive in Indonesia?

It refers to exemptions or government-borne VAT on specific goods, services, or zones, including basic necessities, KEK and bonded zone deliveries, and a 100% PPN DTP facility on residential property up to IDR 5 billion under PMK No. 90/2025.

Can a tax holiday and a tax allowance be combined for the same investment?

No. Under current regulations, a company that has already obtained a tax allowance facility cannot also claim a tax holiday or labor-intensive super deduction for the same investment, so the two need to be evaluated as alternatives during planning, not stacked.

How long does the OSS application process for a tax holiday usually take?

Once an application is complete, BKPM and the Ministry of Finance generally aim to decide within 30 working days, but the realistic end-to-end timeline, including feasibility documentation, often runs three to five months.

Does the Global Minimum Tax cancel out Indonesia’s tax holiday?

Not for every investor. It mainly affects multinational groups above the EUR 750 million revenue threshold, where an effective tax rate below 15% can trigger a top-up tax. Mid-sized investors below that threshold are not subject to GMT and can generally still use the full incentive.

Do foreign investors need a PT PMA before applying for these incentives?

Yes. Tax holiday, tax allowance, and super deduction applications are filed through OSS using the company’s Business Identification Number (NIB), which requires the entity, typically a PT PMA for foreign-owned businesses, to be legally registered first.

References

1. Ministry of Finance of the Republic of Indonesia. (2024). PMK No. 69 of 2024 on Amendments to PMK No. 130/PMK.010/2020 Concerning Corporate Income Tax Reduction Facilities. Retrieved from
https://jdih.kemenkeu.go.id/dok/pmk-69-tahun-2024

2. Directorate General of Taxes, Ministry of Finance. (2025). PMK 136/2024: Fairness in Global Minimum Tax Regulation. Retrieved from
https://www.pajak.go.id/en/node/114204

3. Directorate General of Taxes, Ministry of Finance. (2024). Property Sector Incentive Before It Ends. Retrieved from
https://www.pajak.go.id/id/artikel/sektor-properti-menjerit-ayo-manfaatkan-insentif-ini-sebelum-berakhir

4. Ministry of Administrative and Bureaucratic Reform of the Republic of Indonesia. (2024). Indonesia Extends Tax Holiday Facility Until End of 2025. Retrieved from
https://www.menpan.go.id/site/berita-terkini/berita-daerah/indonesia-perpanjang-fasilitas-tax-holiday-hingga-akhir-2025

5. PwC. (2025). Indonesia: Corporate – Tax Credits and Incentives. Retrieved from
https://taxsummaries.pwc.com/indonesia/corporate/tax-credits-and-incentives

6. EY. (2020). Indonesia Updates Tax Holiday Incentive and Provides Guidance for 300% R&D Super Deduction. Retrieved from
https://www.ey.com/en_gl/tax-alerts/indonesia-updates-tax-holiday-incentive-and-provides-guidance-for-300-r-and-dsuper-deduction