Indonesia Prepares 2026 Tax Holiday Extension Under Global Minimum Tax Rules

JAKARTA, Investortrust.id — Indonesia prepares to extend its tax holiday incentive into 2026 as the current scheme expires on Friday, Dec 31, 2025 in Jakarta, with the government adjusting the policy to align with the OECD’s global minimum corporate tax, a move aimed at preserving investment attractiveness without eroding fiscal revenue.

The tax holiday program is currently governed by Finance Ministry Regulation No. 69 of 2024 and is set to end at the close of 2025.

Director General of Economic and Fiscal Strategy at the Finance Ministry Febrio Nathan Kacaribu said the regulation was being processed for continuation next year, but with significant adjustments.

“This is more than just an extension, because with the global minimum tax, we can only provide tax relief down to 15 percent at the minimum,” Febrio said when met at his office.

With Indonesia’s corporate income tax rate at 22 percent and the global minimum tax set at 15 percent, the maximum effective tax relief under the future tax holiday scheme would be about 7 percent.

The government is studying alternative incentive models similar to those applied in India and Vietnam as substitutes for full tax holidays.

“These countries provide substitute incentive policies in line with agreements signed with the OECD,” Febrio said.

He said the recalibration was intended to prevent Indonesia from effectively subsidizing the fiscal revenues of companies’ home countries.

“If we grant a full tax holiday, the company would end up paying 15 percent tax to its home country instead,” he said.

Under the OECD and G20 framework known as the Global Anti-Base Erosion Rules, or Pillar Two, multinational companies meeting certain revenue thresholds are subject to a global minimum corporate tax of 15 percent.

If a tax holiday or incentive reduces the effective tax rate below that level, the company’s home country may impose a top-up tax to meet the minimum requirement.

The government said the redesigned incentive framework was expected to balance compliance with global tax rules while maintaining Indonesia’s competitiveness in attracting long-term investment.