The 2023 tax expenditure report has been released, providing an overview of the government budget allocated for various tax incentives, including tax allowances, tax holidays, and other benefits. These incentives are designed to stimulate economic growth and act as a buffer during times of financial pressure.
In total, tax expenditures for 2023 reached IDR 362.5 trillion, reflecting a 6.3% increase from the IDR 341.1 trillion recorded in 2022. The government also anticipates further increases in the following tax expenditure for 2024 and 2025:
- 2024: Projected increase of 10.3% to IDR 399.9 trillion
- 2025: Projected increase of 11.4% to IDR 445.5 trillion
One area expected to see significant growth is the tax holiday for pioneer industries. The tax expenditure for pioneer industry tax holidays is projected to rise in both 2024 and 2025. Specifically, it is expected to reach IDR 6,066 billion in 2024 and IDR 6,548 billion in 2025.
Tax Expenditure Table: Pioneer Industry Tax Holiday (in Billion Rupiah)
| Year | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| Tax Holiday for Pioneer Industry | 2,761 | 7,305 | 7,937 | 5,181 | 5,636 | 6,066 |
Source: Tax Expenditure
Legal Basis for Pioneer Industry Tax Holiday
The provisions regarding tax holidays are outlined in the following regulations:
Government Regulation Number 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year, as amended by Government Regulation Number 9 of 2021 concerning Tax Treatment to Support Business Operations.
Law of the Republic of Indonesia Number 25 of 2007 concerning Investment, as amended by Government Regulation Number 2 of 2022 concerning Job Creation.
- Minister of Finance Regulation Number 130/PMK.011/2011 concerning the Provision of Corporate Income Tax Exemption or Reduction, as amended by Minister of Finance Regulation Number 69 of 2024.
Criteria for Industries Eligible for Tax Holiday
Taxpayers can qualify for a tax holiday if they meet the following criteria:
- Classified as a pioneer industry, which includes:
- upstream base metal industry;
- oil and gas refining industry;
- organic basic chemical industry sourced from petroleum, natural gas, or coal;
- organic basic chemical industry sourced from agriculture or plantations;
- inorganic basic chemical industry;
- pharmaceutical raw material industry;
- manufacturing of irradiation, electromedical, or electrotherapeutic apparatus;
- electronics or telematics device component manufacturing;
- machinery and machine component manufacturing;
- robotic component manufacturing that supports the manufacturing machine industry;
- power plant component manufacturing;
- motor vehicle component manufacturing;
- ship component manufacturing;
- railway component manufacturing;
- aircraft component manufacturing;
- agricultural, plantation, or forestry-based processing industry that produces pulp; and
economic infrastructure or digital economy activities, including data processing, hosting, and related services.
Must be an Indonesian legal entity.
Invest new capital.
Have a new capital investment plan of at least IDR 100 billion.
Meet the provisions regarding the ratio of debt to capital as specified in the Minister of Finance Regulation.
- Commit to starting the capital investment plan within one year of receiving the income tax reduction decision.
Below are some frequently asked questions to help you better understand the pioneer industry tax holiday.
Can foreign companies receive a tax holiday?
Yes, as long as they establish an Indonesian legal entity and meet all industry criteria and investment requirements.
What are the benefits of a tax holiday for companies?
A tax holiday can significantly reduce fiscal costs, improve project feasibility, accelerate capital returns, and enhance business competitiveness.
What is the minimum investment required to qualify for a tax holiday?
The minimum investment for new capital is IDR 100 billion.
