Jakarta. Indonesia is reviewing tax holidays in its special economic zones as the country adjusts to the global minimum tax regime, seeking to prevent tax revenues from flowing overseas while preserving its appeal to investors.

Susiwijono Moegiarso, secretary at the Coordinating Ministry for Economic Affairs, said the government is reassessing fiscal incentives following the introduction of the global minimum tax in 2025 to protect Indonesia's taxing rights and maintain investment competitiveness.

The new international tax rules require multinational companies with annual consolidated revenue of at least 750 million euros ($854.5 million) to pay an effective corporate tax rate of at least 15%, regardless of where they operate.

Indonesia's tax holiday scheme has traditionally allowed eligible investors to receive exemptions from corporate income tax, which normally carries a 22% rate. The incentives have been widely used to attract investment into special economic zones and priority industries.

However, under the global minimum tax framework, multinational companies that pay an effective tax rate below 15% in Indonesia because of tax incentives may face additional taxes in their home jurisdictions.

As a result, Indonesia risks foregoing tax revenue without necessarily improving the competitiveness of its investment incentives.

"We do not want taxes that are exempted here to end up being collected by another country," Susiwijono said at the Coordinating Ministry for Economic Affairs. "The global minimum tax agreement sets a 15% rate, while our corporate income tax rate is 22%, so there is a gap."

The global minimum tax applies to multinational enterprise groups with consolidated global revenue of at least 750 million euros. If the effective tax rate paid falls below 15%, companies are required to pay a top-up tax, typically by the end of the following fiscal year.

For example, additional tax obligations arising from the 2025 tax year are expected to be settled by the end of 2026.

Indonesia is now evaluating whether existing tax holidays in special economic zones should be redesigned to ensure the country's taxing rights remain intact while maintaining incentives for foreign investment.

Susiwijono said fiscal incentives should be assessed based on their economic benefits and contribution to investment and growth.

The government does not want tax incentives to merely increase tax expenditure without generating meaningful economic returns.

"Many countries also offer tax holidays. We do not want to attract investment by granting tax incentives here only to see the potential tax revenue collected elsewhere because of the global minimum tax," he said.

The review comes as Indonesia faces growing fiscal pressures and seeks to balance the need to maintain investment competitiveness with efforts to strengthen state revenues.

Susiwijono said the government is reviewing all fiscal instruments as limited fiscal space requires policymakers to carefully weigh revenue needs against public spending priorities.

"Balancing the fiscal side between revenue and spending is not easy," he said. "We have reviewed all of these policies, including their economic impacts."

Indonesia's special economic zones have become one of the country's main vehicles for attracting foreign investment. Cumulative investment across the country's 25 special economic zones has reached Rp336 trillion ($18.8 billion), with Rp82.6 trillion realized in 2025 alone.

Several zones have emerged as major investment and industrial hubs, including Kendal, Gresik, Galang Batang and Sei Mangkei, which have attracted manufacturing, downstream processing and export-oriented projects.