As the year draws to a close, domestic mobility in Indonesia typically surges, especially during the Christmas and New Year holidays. To maintain household purchasing power and stimulate the economy, the government has issued Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 71 of 2025, granting a government-borne VAT incentive for economy-class domestic scheduled commercial flights.
This measure is part of the government’s broader fiscal strategy to curb economic slowdown and support the national aviation sector. So, what exactly is government-borne VAT, and what are its legal basis and objectives? Let’s take a closer look!
What Is Government-Borne VAT?
Government-borne VAT is a tax incentive in which the government covers the VAT typically paid by consumers. This policy allows airlines to maintain their revenue levels while passengers enjoy more affordable ticket prices.
Under PMK Number 71 of 2025, the incentive applies exclusively to domestic economy-class flights operated during a specific period, namely the Christmas 2025 and New Year 2026 holidays.
Legal Basis and Objectives of PMK Number 71 of 2025
Legal Basis:
- PMK Number 71 of 2025 concerning VAT for Economy-Class Domestic Scheduled Commercial Flights.
- Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations.
- PMK Number 92 of 2023 concerning the Implementation and Accountability of Government-Borne Taxes.
Policy Objectives:
- Maintain public purchasing power amid economic headwinds.
- Support recovery in the national aviation industry.
- Boost public mobility during the Christmas and New Year holidays.
- Serve as part of the government's fiscal stimulus for the 2026 fiscal year.
Terms and Conditions for Government-Borne VAT on Domestic Flights
- Eligible Flights:
Only domestic scheduled economy-class flights qualify. Business-class, charter, and international flights are excluded. - Incentive Coverage:
The government covers 6% of the taxable amount, while the ticket buyer pays the remaining 5%. - Validity Period:
The regulation is effective from October 22, 2025, to January 10, 2026, and applies to both ticket purchases and flights occurring within that period. - Reporting and Administration:
Government-borne VAT must be reported in the monthly VAT return under the subsidized supplies section, with aggregate reporting of tax invoices.
Calculating Government-Borne VAT on Airline Tickets
To illustrate, consider the following example of how government-borne VAT is applied to an economy-class ticket:
PT XYZ, an airline affiliated with the Air Force, provides a Jakarta–Yogyakarta economy-class flight for Mr. Mahmud, who purchases his ticket on October 29, 2025, for travel on December 21, 2025, at a total price of IDR 1,350,000. The ticket components are:
- Base fare: IDR 700,000
- Fuel surcharge: IDR 350,000
- PSC/Airport tax: IDR 150,000
- Extra baggage: IDR 100,000
- Seat selection: IDR 50,000
- Total: IDR 1,350,000
Based on these details, the breakdown of VAT payable by the passenger and the amount covered by the government is as follows:
- The ticket price listed is IDR 1,350,000 (one million three hundred fifty thousand rupiah).
- The VAT rate is 12% (twelve percent).
The tax base borne by the service recipient is IDR 500,000 (five hundred thousand rupiah), calculated from:
∑ ([5/11] x [11/12] x consideration)
∑ ([5/11] x [11/12] x [base fare, fuel surcharge, extra baggage, and seat selection])
∑ ([5/11] x [11/12] x IDR 1,200,000)It is important to note that extra baggage and seat selection fees are not considered part of the taxable amount and are thus excluded from the calculation of the tax base eligible for the government-borne VAT incentive.
The tax base borne by the government is IDR 600,000 (six hundred thousand rupiah), calculated from:
∑ ([6/11] x [11/12] x consideration)
∑ ([6/11] x [11/12] x [base fare, fuel surcharge, extra baggage, and seat selection])
∑ ([6/11] x [11/12] x IDR 1,200,000)The VAT payable by the passenger is IDR 60,000 (sixty thousand rupiah), calculated from:
(12% x IDR 500,000)
This VAT is reported in the monthly VAT return under supplies where VAT must be
self-collected, with invoices reported in aggregate.The VAT borne by the government is IDR 72,000 (seventy-two thousand rupiah), calculated from:
(12% x IDR 600,000)
This VAT is reported in the monthly VAT return under supplies receiving VAT or luxury goods sales tax incentives, with invoices also reported in aggregate.
The total amount paid by the passenger is IDR 1,410,000 (one million four hundred ten thousand rupiah), calculated from:
(IDR 1,350,000 + IDR 60,000)
This amount represents the value stated in documents treated as tax invoices (i.e., tickets).
Positive Impact on the Economy and Aviation Industry
- The introduction of government-borne VAT for domestic flights brings several strategic benefits, including:
- Encouraging more travel during the holiday season.
- Making economy-class airfares more affordable.
- Supporting growth in the tourism and aviation sectors.
- Demonstrating tangible fiscal support from the government at year-end.
Overall, the government-borne VAT for domestic flights (PMK Number 71 of 2025) is designed to ease the burden on consumers while keeping airlines afloat. This incentive helps sustain positive economic momentum as the year closes.
FAQ on Government-Borne VAT for Domestic Flights (PMK Number 71 of 2025)
What is government-borne VAT?
It is a tax incentive in which the government covers the VAT typically paid by consumers, allowing passengers to enjoy lower costs on eligible transactions.
What is the legal basis for the government-borne VAT for domestic flights?
The legal basis is PMK Number 71 of 2025 concerning VAT for Economy-Class Domestic Scheduled Commercial Flights During the Christmas and New Year Holidays of Fiscal Year 2026.
Who is eligible for this incentive?
The incentive applies only to domestic, economy-class flights operated by scheduled commercial airlines. Business class, charter, and international flights do not qualify.
Also Read: Withholding Tax on Foreign Taxpayers
Also Read: Financial Statements for Tax Purposes
