Jakarta. The Finance Ministry plans to extend its tax holiday incentive into 2026 to sustain investment momentum, while adjusting the scheme to comply with global minimum tax rules.

Director General of Fiscal and Economic Stability at the Finance Ministry Febrio Nathan Kacaribu said the extension is being prepared through a new ministerial regulation (PMK). The current tax holiday framework is governed by Finance Ministry Regulation (PMK) No. 69/2024, which expires in December 2025.

“The tax holiday PMK is being processed so it can be extended into 2026,” Febrio told reporters at the Finance Ministry on Tuesday.

The new regulation will also be aligned with the global minimum tax regime agreed under the Organisation for Economic Co-operation and Development (OECD), which requires multinational companies to pay a minimum effective corporate tax rate of 15 percent.

Febrio said the global rule limits Indonesia’s ability to grant full corporate income tax exemptions, as companies enjoying a zero-tax regime domestically could instead pay the 15 percent tax to their home countries.

“If we give a full tax holiday, the company would pay the 15 percent tax to its country of origin. That would effectively mean we are subsidizing another country’s budget,” he said.

The government is therefore refining the incentive’s design to ensure it remains attractive to investors while complying with international tax commitments. Febrio stressed that the tax holiday policy itself would continue.

“The policy will continue in 2026,” he said.

A tax holiday is a fiscal incentive offered by the Indonesian government to attract investment into strategic sectors or priority regions with significant economic impact. The facility provides reductions in corporate income tax to eligible investors undertaking new capital investments.

Under PMK No. 69/2024, the tax holiday grants corporate income tax reductions of up to 100 percent for domestic corporate taxpayers making new investments of at least Rp 100 billion ($6 million). The incentive applies to investments in so-called pioneer industries or in designated strategic locations such as Special Economic Zones (KEK) and Indonesia's future capital Nusantara (IKN) in East Kalimantan.

Pioneer industries are those considered to have high value-added, strong spillover effects, advanced technology, or strategic importance to national development, including pharmaceuticals, electric vehicles, petrochemicals, robotics, and renewable energy.

The tax exemption period ranges from five to 20 years, depending on the size of the investment, with larger investments qualifying for longer terms. After the tax holiday expires, companies are typically entitled to a 50 percent corporate income tax reduction for an additional two years.

PMK No. 69/2024 also outlines administrative requirements, including approval from the Finance Ministry and compliance with investment realization targets. The regulation currently applies to tax holiday approvals issued through December 2025, which the government now plans to extend into 2026 through a new Finance Ministry Regulation.

However, the framework is being recalibrated to align with the OECD’s global minimum tax agreement. Under the global rules, any tax not collected in Indonesia could instead be levied by an investor’s home country. To avoid effectively transferring fiscal benefits abroad, the government is redesigning the incentive while maintaining support for investment.