Government Covers Income Tax for Labor-Intensive Workers in 2026
Key Takeaways
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JAKARTA, Investortrust.id — The government covers personal income tax for workers in five labor-intensive sectors in 2026 under a newly issued regulation aimed at protecting purchasing power and supporting economic stability nationwide. The policy applies throughout 2026 and forms part of the fiscal stimulus package to sustain household welfare and employment.
The measure was stipulated in Finance Ministry Regulation No. 105 of 2025, which set out fiscal facilities to stabilize the economy and social conditions during the 2026 budget year. The regulation was issued on Sunday, Dec 29, 2025, and took effect on Wednesday, Dec 31, 2025.
The eligible sectors include footwear manufacturing, textiles and apparel, furniture, leather and leather goods, and tourism. These industries were identified as labor intensive and vulnerable to demand shocks.
The incentive covers Income Tax Article 21 on all fixed and regular gross income received in 2026, including base salary, fixed allowances, and similar compensation stipulated in company rules or employment contracts. Variable or irregular income is excluded.
Eligible recipients include certain permanent employees and non permanent workers earning less than Rp 10 million per month. For daily, weekly, piece rate, or contract based workers, eligibility applies if the average daily wage does not exceed Rp 500,000.
Workers must hold a registered taxpayer identification number or a national identity number integrated into the tax authority system. They must also not receive other Income Tax Article 21 incentives under separate tax provisions.
Under the regulation, employers remain required to withhold Income Tax Article 21 but must pay the tax amount in cash to employees at the time income is paid. The cash payment is not treated as taxable income for the employee.
Employers are also required to issue withholding tax slips and report the facility in the monthly Income Tax Article 21 return. These administrative obligations apply even if the employer already provides tax allowances or bears the tax on behalf of employees.