Investment plays an important role in sustaining Indonesia’s economic growth. To foster a competitive business environment, the government continues to introduce various policies, including tax incentives for corporate taxpayers.
The issuance of Government Regulation (Peraturan Pemerintah/PP) Number 20 of 2026 brings changes for businesses operating as limited liability companies (perseroan terbatas/PTs). Under the new regulation, PTs can no longer use the final income tax regime for MSMEs and must instead follow the general taxation rules. However, the end of this particular tax incentive does not mean that fiscal support for businesses has ended.
The government continues to offer various corporate income tax incentives that businesses can access depending on their industry, investment location, and business operations. These incentives are designed to encourage investment, create jobs, boost industrial activity, and fortify the Indonesian economy’s competitiveness.
Here are seven corporate income tax incentives that businesses should be aware of.
1. Tax Holiday for Pioneer Industries
A tax holiday provides a corporate income tax reduction for a specified period. It is specifically available to resident corporate taxpayers making new investments in sectors classified as pioneer industries.
Currently, 18 sectors qualify as pioneer industries eligible for the tax holiday. These include basic metals, oil and gas refining, machinery components, economic infrastructure development, and digital economy development.
One of the most essential requirements is a new investment plan of at least IDR 100 billion. The investment must also be realized no later than one year after the decision granting the corporate income tax reduction is issued.
The tax holiday is regulated under Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 130/PMK.010/2020, as amended by PMK Number 69 of 2024.
2. Tax Allowance for Specific Industries and Regions
The government also provides a tax allowance to encourage investment in certain industries and priority development areas.
One of the incentives is a net income reduction equivalent to 30% of the value invested in tangible fixed assets. The deduction is granted gradually over six years. Taxpayers may also benefit from accelerated depreciation and amortization.
The tax allowance is available to resident corporate taxpayers investing in qualifying business sectors and/or regions under PP Number 78 of 2019.
Factors considered in granting the incentive include the investment value, export orientation, employment capacity, and use of local content level. The technical provisions are set out under PMK Number 81 of 2024, particularly Articles 407 to 422.
3. Investment Allowance for Labor-Intensive Industries
Labor-intensive industries play a fundamental role in creating employment. To encourage investment in these sectors, the government provides an investment allowance.
Under this incentive, taxpayers may receive a net income deduction equal to 60% of the investment value in tangible fixed assets used in their main business operations. The deduction is granted over six years, starting from the fiscal year in which the company begins commercial production.
One of the core requirements is that the company must employ at least 300 Indonesian workers. This figure is calculated based on the average number of employees during a fiscal year.
The investment allowance for labor-intensive industries is regulated under Articles 423 to 431 of PMK Number 81 of 2024.
4. Super Tax Deduction for Research and Development
Research and development are important drivers of innovation and industrial competitiveness. The government provides a super tax deduction to spur companies to conduct research and development in Indonesia.
The incentive allows taxpayers to deduct up to 300% of qualifying research and development expenses from gross income.
The deduction comprises a 100% deduction for actual expenses incurred, plus an additional deduction of up to 200% if they satisfy specific criteria. The criteria may include generating intellectual property rights, registering a patent, or successfully reaching the commercialization stage.
The research and development must also relate to government-designated priority areas, such as food, pharmaceuticals, energy, and transportation equipment, and must be intended to produce discoveries or innovations.
Further provisions are set out in Articles 432 to 441 of PMK Number 81 of 2024.
5. Super Tax Deduction for Vocational Programs
The growing demand for workers with industry-relevant skills is one reason the government provides incentives to companies involved in vocational education and training.
Under the vocational super tax deduction, taxpayers may deduct up to 200% of eligible expenses incurred for apprenticeships, internships, and/or learning activities from gross income.
To qualify, a resident corporate taxpayer must have a cooperation agreement with a vocational education or training institution. Eligible partners may include vocational high schools, vocational training centers, and higher education institutions offering diploma programs.
Taxpayers must also not be in a tax loss position in the fiscal year in which the incentive is utilized and must hold a valid tax clearance certificate in accordance with prevailing regulations.
The vocational super tax deduction is regulated under PMK Number 128/PMK.010/2019.
6. Corporate Income Tax Incentives in Special Economic Zones
Special economic zones (SEZs) are developed as centers of economic activity offering various advantages across industries, trade, exports and imports, and other high-value-added sectors.
Tax incentives in these zones may be granted to two types of taxpayers, i.e., entities managing the zone and businesses conducting investment activities within the zone. Both may qualify for specific incentives provided they meet the requirements for domestic legal entities and hold the required business licenses.
To qualify for a tax holiday, one of the main requirements is a minimum investment of IDR 100 billion in the SEZ’s main activities. Businesses that do not use the tax holiday or whose investment falls below this threshold may still be eligible for a tax allowance, subject to the applicable requirements.
The tax, customs, and excise provisions for SEZs are regulated under PMK Number 237/PMK.010/2020, as amended by PMK Number 33/PMK.010/2021.
7. Income Tax Incentives in Nusantara Capital City
Nusantara Capital City (Ibu Kota Nusantara/IKN) is another area offering various tax incentives to attract investment and promote the development of a new economic growth center.
Available incentives include tax holidays for investments in IKN, corporate income tax reductions for financial-sector activities in the financial center, incentives for relocating headquarters, and gross income deductions for donations or expenses related to the construction of public facilities, social facilities, and other non-profit facilities.
Tax and customs incentives in IKN are regulated under PMK Number 28 of 2024. To qualify for the tax holiday for investment in IKN, resident corporate taxpayers must invest at least IDR 10 billion in qualifying sectors, such as infrastructure, public services, or activities supporting economic development.
During the incentive period, taxpayers must also comply with certain requirements, including restrictions on transferring incentive-qualifying capital goods and relocating investments outside the IKN area.
Developing the Right Tax Strategy
The transition from the final income tax regime for MSMEs to the general tax system requires PTs to make adjustments. Nevertheless, the change does not eliminate opportunities to benefit from fiscal support.
Available corporate income tax incentives offer more diverse benefits that can be aligned with a company’s industry, investment scale, business location, and contribution to the economy. By understanding the incentive types, eligibility requirements, and application mechanisms, corporate taxpayers can develop a more effective tax strategy.
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