Tax Breaks Power Indonesia’s 2026 Growth Push

JAKARTA, Investortrust.id — Finance Minister Purbaya Yudhi Sadewa sets income tax relief for workers earning up to Rp 10 million per month in Jakarta as the government rolls out fiscal incentives to support household spending and reinforce a stronger economic outlook for 2026. The policy aims to protect purchasing power and sustain growth momentum amid global uncertainty.

The incentive is stipulated in Finance Ministry Regulation Number 105 of 2025 on Article 21 income tax borne by the government as part of the 2026 economic stimulus. The regulation was issued on Dec 31, 2025 and took effect immediately.

The ministry said the measure was designed to preserve household welfare while reinforcing the fiscal stabilisation function. “As part of the government’s efforts to maintain public welfare, fiscal facilities are provided,” the regulation stated.

The policy applies to workers earning up to Rp 10 million per month in five priority sectors: footwear, textiles and apparel, furniture, leather goods, and tourism. Eligible recipients include both permanent and non permanent workers who meet tax identification and income criteria.

Although the tax is still deducted administratively, employers must reimburse the amount in cash so it does not reduce workers’ take home pay. The ministry said this mechanism ensures income support without disrupting tax administration.

Alongside income tax relief, the government has extended a 100 percent value added tax incentive borne by the state for home purchases through December 2026. The policy is regulated under Finance Ministry Regulation Number 90 of 2025 and applies from Jan 1, 2026.

The VAT incentive covers landed houses and apartment units with selling prices up to Rp 2 billion and is available for homes priced at up to Rp 5 billion. Developers are required to report VAT incentive realisation and handover documentation to the government.

Purbaya said the extension was aimed at sustaining economic expansion by strengthening demand in the housing sector. “To ensure Indonesia’s economic growth remains on track, the government provides an economic welfare package in the form of VAT incentives on the delivery of houses and apartment units borne by the state in fiscal year 2026,” the regulation said.

The tax measures come as the Finance Ministry projects a resilient economic backdrop entering 2026. Director General of Economic and Fiscal Strategy Febrio Nathan Kacaribu said Indonesia closed 2025 with solid fundamentals despite external pressures.

“Indonesia’s economy at the end of 2025 remained resilient, supported by expanding manufacturing activity, controlled inflation, and a continued trade surplus,” Febrio said in a statement on Tuesday, Jan 6, 2026.

Manufacturing activity remained in expansion territory, with the December 2025 purchasing managers index at 51.2, marking five consecutive months of growth. Febrio said this performance was driven by strong domestic demand, rising employment, and higher raw material purchases.

Externally, manufacturing activity in key trading partners such as the United States, China, and India also stayed in expansion, providing support for Indonesia’s exports. Within Southeast Asia, Thailand and Malaysia posted improving manufacturing readings.

Indonesia’s trade balance recorded a surplus of $38.54 billion in January to November 2025, extending a surplus streak that began in May 2020. Exports rose 5.61 percent to $256.56 billion, led by the manufacturing sector, while imports increased 2.03 percent to $218.02 billion.

Inflation remained contained at 2.92 percent year on year in 2025 despite higher food price volatility. Febrio said weather disruptions and distribution constraints pushed volatile food inflation higher, while core inflation stayed stable.

“Fiscal policy will continue to focus on maintaining stability while strengthening growth momentum to ensure inclusive and sustainable economic expansion,” Febrio said.