Entering 2026, businesses in Indonesia are facing increasingly complex global economic challenges. Commodity price fluctuations, geopolitical uncertainty, and climate related risks are forcing companies to adopt more strategic financial planning approaches.
Amid these conditions, the Indonesian government is providing significant opportunities through fiscal incentives. One of the most attractive programs for Domestic Investment Limited Liability Companies (Perseroan Terbatas Penanaman Modal Dalam Negeri or PT PMDN) is the tax allowance 2026 facility, which allows companies to substantially reduce their tax burden from the early stages of investment.
For businesses planning expansion or new project development, understanding this incentive scheme can become a key driver of long term financial efficiency.
Understanding the Fiscal Policy Framework in 2026
The Indonesian government continues to strengthen tax incentive policies as part of its strategy to sustain national economic growth.
Over the past two years, tax expenditure has shown a consistent upward trend, reflecting the government’s commitment to using fiscal incentives as economic stimulus rather than solely as revenue tools.
The main legal basis for the tax allowance incentive remains Government Regulation Number 78 of 2019 (PP 78/2019), which has been aligned with updated regulations for the 2026 fiscal year.
One important supporting regulation is Ministry of Finance Regulation Number 105 of 2025 (PMK 105/2025), which introduces additional incentives in the form of Article 21 Income Tax Borne by the Government (Pajak Penghasilan Pasal 21 Ditanggung Pemerintah or PPh 21 DTP) for specific sectors.
For PT PMDN entities, this combination of incentives creates operational efficiency not only at the corporate level but also in workforce cost management.
The Strategic Role of KBLI 2025 in Accessing Tax Incentives
One major regulatory update that businesses must pay close attention to is the implementation of the 2025 Indonesian Business Classification System (Klasifikasi Baku Lapangan Usaha Indonesia 2025 or KBLI 2025).
This new classification framework replaces KBLI 2020 and introduces significant sector adjustments.
Key implications of KBLI 2025 include:
- The addition of new economic activity categories
- The consolidation and segmentation of business codes
- More detailed classification for green energy and digital sectors
For example, activities such as Carbon Capture and Storage (CCS) now have dedicated business codes. Power generation activities are also clearly differentiated between renewable and non renewable energy sources.
For PT PMDN companies, updating business classifications is not merely an administrative process. Incorrect business codes can immediately disqualify a company from accessing tax allowance 2026 benefits. The deadline for updating Business Identification Numbers or (Nomor Induk Berusaha or NIB) to align with KBLI 2025 is set for 18 June 2026.
Business Sectors Eligible for Incentives in 2026
The government has structured tax incentives through two primary channels.
Sectors Eligible for Article 21 Income Tax Incentives
A total of 133 Business Activity Classification codes (Klasifikasi Lapangan Usaha or KLU) qualify for government borne employee income tax incentives.
Key sectors include:
- Footwear manufacturing industry
- Textile and garment industry
- Furniture manufacturing industry
- Leather processing and leather product industry
- Tourism and accommodation services
These sectors are prioritised due to their labour intensive nature and their role in maintaining socio economic stability.
Sectors Eligible for Corporate Tax Allowance
For corporate income tax incentives, more than 160 specific business sectors are eligible, including:
- Agricultural product processing industries
- Basic metal industries
- Organic chemical manufacturing
- Digital infrastructure and data centre operations
- Other strategic manufacturing sectors
Companies operating in these industries have substantial opportunities to achieve long term tax savings.
Key Mechanisms of the Tax Allowance Facility
The tax allowance program is designed to provide cumulative benefits, allowing companies to optimise several incentives simultaneously.
Net Income Reduction
Companies are entitled to reduce taxable income by 30 percent of total investment in tangible fixed assets. This deduction is applied evenly over six years at five percent per year.
In practice, this directly reduces annual corporate tax liabilities.
Accelerated Depreciation and Amortisation
Assets acquired for investment purposes can be depreciated at an accelerated rate. This approach lowers taxable income during early operational years when cash flow demands are typically higher.
Extended Loss Compensation Period
If a company incurs fiscal losses during initial project phases, the compensation period may be extended up to ten years, subject to certain criteria such as investment location, workforce absorption, and use of local raw materials.
Reduced Dividend Tax Rate
Dividend income paid to foreign shareholders may be subject to a reduced income tax rate of ten percent or lower based on applicable international tax treaties.
Administrative Requirements for PT PMDN Companies
To access tax allowance 2026 benefits, companies must meet several quantitative and qualitative criteria.
Minimum Investment Value
Thresholds vary by sector, but generally include:
- Manufacturing industries starting from IDR 100 billion
- Labour intensive industries focused on workforce numbers
- Infrastructure projects starting from IDR 500 billion
Workforce Absorption
Certain sectors require the employment of hundreds of Indonesian workers.
Domestic Component Level
The Domestic Component Level (Tingkat Komponen Dalam Negeri or TKDN) plays a crucial evaluation role. Higher local content increases the likelihood of incentive approval.
Export Orientation
Companies with export focused operations receive additional consideration during incentive assessments.
Master List Facility: Reducing Machinery Import Costs
In addition to tax reductions, PT PMDN companies can optimise capital expenditure through the Master List facility.
This program provides exemptions on:
- Import duties
- Import value added tax
- Article 22 import income tax
Simplified Application Process
- Prepare a detailed machinery list with Harmonized System (HS) codes and specifications
- Ensure the company’s tax compliance status is clear
- Submit the application through the Online Single Submission Risk Based Approach system (OSS RBA)
- Await technical evaluation by relevant authorities
- Obtain the import duty exemption approval letter
For large scale projects, savings from the Master List facility can reach millions of dollars.
New Challenges: CoreTax System Integration
Starting in 2026, all tax incentive claims will be directly integrated with the Directorate General of Taxes CoreTax System.
This means:
- Investment data must align with Investment Activity Reports (Laporan Kegiatan Penanaman Modal or LKPM)
- Tax identities must be validated through National Identification Numbers (Nomor Induk Kependudukan or NIK) and Tax Identification Numbers (Nomor Pokok Wajib Pajak or NPWP)
- Monthly incentive reporting must be accurate and timely
Even minor data discrepancies may result in delayed or cancelled incentive approvals.
Strategic Benefits for PT PMDN Companies
When implemented with proper planning, tax allowance 2026 delivers significant advantages:
- Long term corporate tax reduction
- Improved early stage cash flow
- Faster investment return cycles
- Increased project attractiveness to investors and financial institutions
Additionally, these policies encourage sustainable business ecosystems through local workforce development and domestic supply chain utilisation.
The Role of XPND in Establishing PT PMDN and Optimising Tax Allowance 2026
Accessing tax allowance 2026 requires a well structured business setup from the beginning, starting with PT PMDN establishment and accurate KBLI 2025 classification. XPND serves as a strategic partner guiding companies throughout this entire process.
XPND supports PT PMDN incorporation, OSS RBA licensing procedures, and business classification alignment to meet tax incentive eligibility standards. This regulatory compliant structure provides a solid foundation for tax allowance applications and other fiscal incentives.
Beyond legal formation, XPND also assists with:
- Preparation of tax allowance application documentation
- Master List processing for duty free machinery imports
- Investment data synchronisation within the CoreTax System
This integrated approach ensures PT PMDN companies maximise tax benefits while maintaining full regulatory compliance.
