The Ministry of Finance has reported a steady increase in the estimated value of tax expenditures related to tax holiday incentives in Special Economic Zones (SEZs) over the years. While the growth is modest, it reflects a rising interest and confidence among investors in integrated industrial areas focused on export-oriented activities.
According to the 2023 Tax Expenditure Report, tax expenditures for SZE tax holidays reached IDR 36 billion in 2023. The figure rose to IDR 39 billion in 2024 and IDR 42 billion in 2025, and is projected to reach IDR 46 billion in 2026. This upward trend underscores the government’s continued reliance on SEZs as a strategic tool for attracting investment.
Purpose of Granting Tax Holidays in SEZs
The primary goal of offering tax holidays in SEZs is to enhance the investment climate by providing:
- Reductions or exemptions of corporate income tax for businesses operating within SEZs; and
- Incentives for investors engaged in the main activities in SEZs.
Legal Basis for Tax Holidays in SZEs
The regulations governing tax holidays in SEZs include:
- Law of the Republic of Indonesia Number 39 of 2009 concerning Special Economic Zones.
- Law of the Republic of Indonesia Number 11 of 2020 concerning Job Creation.
- Minister of Finance Regulation Number 237/PMK.010/2020 concerning Tax, Customs, and Excise Treatment in Special Economic Zones, as amended by Minister of Finance Regulation Number 33/PMK.010/2021 concerning Amendments to Minister of Finance Regulation Number 237/PMK.010/2020 concerning Tax, Customs, and Excise Treatment in Special Economic Zones.
These regulations outline the incentives available for income tax, VAT, import duties, import levies, and excise for businesses operating in SEZs.
Requirements for Obtaining Tax Holidays in SEZs
To qualify for SEZ tax incentives, businesses must meet the following criteria:
- Be resident corporate taxpayers, either head offices or branches, engaged in SEZ activities.
- Be officially designated as business entities responsible for developing and/or operating SEZs by the National Council or relevant regional or ministerial authorities.
- Have clearly defined boundaries in line with SEZ development stages.
- Hold a valid business license.
Corporate Income Tax Reduction
Under Minister of Finance Regulation Number 33/PMK.010/2021, taxpayers investing at least IDR 100 billion in SEZs are eligible for a 100% corporate income tax exemption on the income tax payable.
The duration of the tax incentive is determined by the investment amount, as detailed below:
| No. | Investment Amount (IDR) | Tax Incentive Period |
| 1 | 100,000,000,000.00 - 500,000,000,000.00 | 10 years |
| 2 | 500,000,000,000.00 - 1,000,000,000,000.00 | 15 years |
| 3 | At least 1,000,000,000,000.00 | 20 years |
After the tax holiday period concludes, businesses are entitled to a 50% corporate income tax reduction for the following two fiscal years. Additionally, they receive automatic exemption from tax withholding and collection without the need for a tax exemption certificate (Surat Keterangan Bebas/SKB).
Other Income Tax Incentives
Article 4 of Minister of Finance Regulation Number 237/PMK.010/2020 offers additional options for businesses in SEZs, including:
Net Income Reduction
- A 30% reduction of the investment value in tangible fixed assets, including land.
- Spread over six years.
- Accelerated Depreciation
Applicable to tangible fixed assets acquired as part of a capital investment.
- Lower Withholding Tax Rates on Dividends
- Fiscal Loss Compensation
List of SEZs in Indonesia
The government has approved the following SEZs:
- Arun Lhokseumawe SEZ: Petrochemical, chemical, and logistics industries
- Sei Mangkei SEZ: Palm oil, rubber, tourism, and logistics processing industries
- Galang Batang SEZ: Bauxite processing and logistics industries
- Kendal SEZ: Textile, furniture, food and beverage, automotive, electronics, and logistics industries
- Gresik SEZ: Metal, electronics, chemical, energy, and logistics industries
- Maloy Batuta Trans Kalimantan SEZ: Palm oil, wood, energy, and logistics processing industries
- Palu SEZ: Basic metal and logistics industries
- Bitung SEZ: Coconut, fisheries, and logistics processing industries
- Morotai SEZ: Fisheries processing, tourism, and logistics industries
- Sorong SEZ: Nickel, palm oil, forest and plantation products, and logistics processing industries
- Tanjung Sauh SEZ: Production and processing, logistics and distribution, and energy development industries
- Setangga SEZ: Industrial, logistics and distribution, and energy development area
- Tanjung Kelayang SEZ: Tourism industry
- Tanjung Lesung SEZ: Tourism industry
- Lido SEZ: Tourism and creative industries
- Kura Kura Bali SEZ: Tourism and creative industries
- Mandalika SEZ: Tourism industry
- Likupang SEZ: Tourism industry
- Nongsa SEZ: Research, digital economy, technology development, tourism, education, and creative industries
- Singhasari SEZ: Tourism and technology development industries
- Batam Aero Technic SEZ: Aircraft MRO industry
- Sanur SEZ: Health and tourism industries
For a more practical overview, here are some of the most frequently asked questions about tax holidays in SEZ.
Who is eligible for tax holiday incentives?
Resident corporate taxpayers designated as SEZ business entities or actors with valid business permits.
Are tax holidays granted automatically?
Yes. The incentive includes automatic exemptions from tax withholding and collection without requiring an SKB.
Are there other tax incentives available in SEZs besides tax holidays?
Yes. Other incentives include reduced net income, accelerated depreciation, lower dividend withholding tax rates, and loss compensation for up to 10 years.
