Tax refunds will face more structured oversight in 2027. The government and the House of Representatives Budget Committee have agreed on Article 37 of the 2027 State Budget Bill, which gives the Minister of Finance authority to audit state revenue, including special audits of tax refunds.
The provision expands on the state revenue audit authority already provided under the 2026 State Budget Law. The main difference is that the 2027 State Budget Bill explicitly includes tax refunds as eligible for special audits. The Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) will further regulate the procedures. The elucidation of Article 37 also allows for joint audits.
Simply put, the biggest change does not yet lie in how the audits will be conducted. The government still needs to translate this authority into implementing regulations. These rules will determine the boundaries between refund oversight and the existing tax refund scheme under tax regulations.
Tax Refunds Under Scrutiny
The policy change comes after a significant increase in tax refunds in 2025. DGT data shows that tax refunds paid through August 2026 reached IDR 191.82 trillion, down 37% from IDR 304.29 trillion in the same period a year earlier. Total tax refunds reached around IDR 361 trillion in 2025.
The decline in 2026 coincided with changes to the preliminary refund regulation under PMK Number 28 of 2026. Effective May 1, 2026, the regulation replaced PMK Number 39 of 2018 and its amendments. The government said the changes were intended to improve accuracy, legal certainty, and the targeting of preliminary refunds.
PMK Number 28 of 2026 sets out three categories of taxpayers eligible for preliminary refunds, i.e., taxpayers with specific criteria, taxpayers meeting specific requirements, and low-risk taxable entrepreneurs (pengusaha kena pajak/PKP). The procedure still relies on reviewing the refund application rather than conducting a tax audit.
This distinction matters because the preliminary refund is designed to speed up the return of overpaid taxes to taxpayers who meet specific criteria. Under the scheme, refunds can be made before a full tax audit.
PMK Number 28 of 2026 also changes several eligibility requirements. Decisions designating taxpayers as taxpayers with specific criteria under the previous rules ceased to apply when the new rules took effect. Taxpayers seeking this status must submit a new application under the new requirements.
Accordingly, the 2026 tax refund policy has moved toward a criteria-based oversight approach. The 2027 State Budget Bill adds another layer by introducing special audit powers within this framework.
From Review to Special Audit
For businesses, the central question is not merely whether tax refunds are auditable. Audits are already part of the tax system. The more crucial questions are when a special audit will be used, who will be subject to it, what criteria will apply, and how it will interact with the refund deadlines set out in the KUP Law.
Article 37 of the 2027 State Budget Bill still does not answer all of these questions. The agreed provision establishes the authority and delegates further regulation to the Minister of Finance. The forthcoming PMK will therefore be essential in determining whether special audits will be limited to refund applications with specific risk indicators or applied more broadly.
This choice will affect certainty around refund timelines. If special audits target applications showing anomalies or specific risks, the procedure could add another layer of risk-based oversight. If the criteria are unclear, however, taxpayers may find it difficult to anticipate how long their refund applications will take.
It is important to note that a tax refund is not an additional benefit granted to taxpayers. Instead, it is the return of an overpaid tax under the applicable rules.
Leveraging Coretax
Special audits and changes to the tax administration system are inseparable. The government has launched Coretax as part of the tax administration core system reform. Its legal basis includes PMK Number 81 of 2024, which took effect on January 1, 2025, and has been amended several times, most recently by PMK Number 1 of 2026.
Digitalization gives the DGT greater scope to match data across different sources. Tax invoices, payments, transactions, and tax documents can be used to assess whether taxpayers’ reported information is consistent.
In light of tax refunds, this approach could allow applications supported by consistent data to be processed through simpler procedures, while applications showing discrepancies could be subject to further review or audit.
The elucidation of Article 37 of the 2027 State Budget Bill also opens the possibility of joint audits, allowing audits to involve more than one government unit or agency as part of a coordinated program.
For export and import transactions, integrating tax and customs data will be particularly vital. Such data can be used to reconcile transactions reported in tax returns with their supporting documents.
Corporate Cash Flow
Companies that regularly have overpaid tax positions will feel the changes most directly. Exporters commonly face this, as exports are subject to a 0% VAT rate while companies still incur input VAT on various production inputs.
When input VAT exceeds output VAT, a company may overpay and apply for a refund. For companies with significant working capital needs, refund timing becomes part of cash flow planning.
Changes to the requirements and eligibility for preliminary refunds may therefore affect companies’ choices. Taxpayers that no longer qualify for a preliminary refund will need to use the standard refund procedure under the applicable rules.
PMK Number 28 of 2026 also means that a taxpayer with specific criteria status can no longer be maintained solely based on a previous designation. Taxpayers whose designation is no longer valid may submit a new application and must meet the requirements under the new rules.
In such situations, companies need to factor the expected refund timeline into their working capital planning. The larger the overpayment and the longer the refund takes, the more company funds remain tied up and unavailable for operational activities.
Higher Risk of Disputes
Expanding special audit powers could also increase the risk of disputes if the scope and criteria for audits are not clearly defined. An audit that results in a reduction of the refund amount may lead to the issuance of a tax underpayment assessment letter (surat ketetapan pajak kurang bayar/SKPKB). If a taxpayer disagrees with the audit findings, they may file an objection, appeal, and ultimately a judicial review.
The DGT’s 2025 Financial Statements recorded 64,625 unresolved tax disputes at the end of 2025, totaling IDR 176.15 trillion. Disputes involving underpayment assessments accounted for IDR 132.83 trillion, while disputes involving overpayment assessments accounted for IDR 43.32 trillion. These figures suggest that tax disputes are not limited to additional tax assessments but can also involve decisions on tax overpayments.
The quality of audit findings has a pivotal role in managing disputes. In 2025, the DGT’s success rate at the Tax Court was 37.50%, down from 44.14% in 2024 and below the 46% KPI target. During the same period, approximately 47.06% of resolved decisions granted taxpayers’ appeals. These figures do not necessarily mean that all audit adjustments lacked a legal basis, but they indicate room to improve the quality of audits and tax assessments.
Thus, measurable risk criteria and indicators should support special audits. Taxpayers must understand what circumstances may trigger additional scrutiny, while the DGT can focus its resources on refund applications showing potential inconsistencies. Clear criteria can also help reduce differing interpretations between auditors and taxpayers.
For businesses, changes to refund amounts also directly affect cash flow. Refunds not yet received can affect working capital, particularly for companies that regularly have overpaid tax positions. If an additional audit leads to a dispute, receiving the funds may take even longer as the matter moves through administrative procedures and available legal remedies.
As a result, the effectiveness of special audits should not only be measured by the number of findings or adjustments generated. The quality of assessments, accuracy in selecting audit targets, procedural certainty, and timely processing of refunds should also form part of the performance measures. Such assessments enable special audit powers to focus on genuinely high-risk refund applications without creating disputes that a more targeted audit process could have avoided.
Awaiting Implementing Regulations
For now, the most critical aspect of Article 37 of the 2027 State Budget Bill is that it establishes the legal basis for the authority. Implementing regulations will set out the procedural details.
Three areas will determine its impact on businesses. First, the definition and criteria for special audits. The government must clarify the circumstances that may trigger a special audit so that taxpayers have greater certainty over how their refund applications will be handled.
Second, the relationship between special audits and the tax refund provisions under the KUP Law. The implementing regulations must explain how special audits will fit within the existing procedures, including applicable deadlines and taxpayer rights.
Third, the use of Coretax and joint audits. Data integration should improve audit accuracy and risk profiling, not simply add another layer of administration.
Updates to the tax refund policy fundamentally go beyond when overpaid taxes are returned. The government is developing a procedure that brings together risk-based oversight, digital tax administration, and state revenue audit powers.
For the government, the challenge is to identify refund applications that require further scrutiny without delaying refunds to which taxpayers are entitled. For businesses, the changes make accurate data, proper transaction documentation, and audit readiness increasingly important. Article 37 of the 2027 State Budget Bill provides the framework. Its practical impact will depend on the implementing regulations that follow.
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