Indonesia’s economy grew 5.29% year-on-year (YoY) in Q2 2026, slowing from 5.61% in the previous quarter, according to data from Statistics Indonesia. Household consumption remained a primary driver of economic growth, expanding 5.06% and accounting for 53.32% of gross domestic product (GDP). This continued consumer spending supports the fast-moving consumer goods (FMCG) industry, which is closely tied to household spending.
In the second half of 2026, consumer spending patterns began shifting from discretionary purchases, such as clothing, entertainment, and other non-essential goods, toward necessities following Ramadan and Eid al-Fitr. Spending on food and beverages outside restaurants grew 4.25%, while growth in clothing and footwear slowed to 3.52%. The food and beverage industry, an essential FMCG subsector, grew 6.51%. Meanwhile, the dairy processing industry recorded quarterly growth of 17.3% and annual growth of 29.89%.
Growth in the dairy and nutritious food subsectors has also been supported by government spending through the free nutritious meal (makan bergizi gratis/MBG) program, which has boosted supply chain activity, from raw material procurement to distribution.
Looking ahead, the FMCG sector faces the challenge of maintaining sales volumes amid post-peak cooling and pressure on middle-class purchasing power, particularly as fiscal stimulus measures begin to taper off. Companies may need to adjust their strategies by offering more affordable products, economical packaging, and value-driven offerings.
Tax Contributions and Fiscal Issues
The FMCG industry contributes to tax revenue through diverse tax instruments, including value-added tax (VAT), corporate income tax, Article 23 income tax, and Article 22 income tax. VAT arises throughout the distribution chain, from manufacturers to consumers, while corporate income tax applies to corporate profits. Article 23 income tax may apply to payments for third-party services and royalties, while Article 22 income tax may arise from the import of raw materials and transactions with government entities.
FMCG companies’ involvement in supplying goods and logistics for government programs, including MBG, has also increased business-to-government (B2G) transactions. Such transactions may trigger Article 22 income tax withholding obligations.
Under Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 51 of 2025, sales of goods to government agencies or treasurers are subject to Article 22 income tax withholding at 1.5% of the purchase price, excluding VAT. This tax is withheld upfront and may be credited against the company’s tax liability at the end of the fiscal year. Accordingly, companies need to factor the resulting cash flow impact into their financial planning.
Mapping Tax Risk Areas
The FMCG business model is characterized by high transaction volumes, rapid inventory turnover, and significant distribution and promotional expenses, creating several tax risk areas. The Directorate General of Taxes (DGT) is also increasingly relying on integrated compliance risk management (CRM) through the Coretax system to identify taxpayer compliance patterns and anomalies.
At least four tax risk areas warrant FMCG companies’ attention.
1. Promotional Expenses and Article 23 Income Tax
Promotional expenses, including trade promotions and activities intended to drive sales through modern retail channels, are an important part of FMCG operations. However, the deductibility of these expenses in determining taxable income is subject to administrative requirements under PMK Number 02/PMK.03/2010.
Taxpayers must maintain a nominative list containing the recipient’s name, taxpayer identification number (nomor pokok wajib pajak/NPWP), address, expense amount, and withholding tax slip number. Incomplete documentation may result in a fiscal adjustment, even when the company can demonstrate that the expenses relate to its business activities. The Coretax system rollout is also expected to make it easier for the DGT to match the nominative lists companies automatically report against their counterparties’ tax returns, making the validity of recipients’ NPWP or national identification number (nomor induk kependudukan/NIK) particularly important.
Besides nominative lists, trading terms between FMCG principals and distributors may also lead to differing interpretations of which transactions are subject to Article 23 income tax withholding.
2. VAT on Free Product Samples
Providing products free of charge to consumers is a common promotional activity among FMCG companies. From a tax perspective, the free distribution of taxable goods may constitute a transaction subject to VAT.
The tax invoice for such transactions uses transaction code 04, with the tax base calculated using the prescribed other value, i.e., the selling price less gross profit, equivalent to the cost of goods sold.
Companies should ensure that product-sample transactions are properly identified and documented. Errors in VAT treatment may result in additional tax and administrative sanctions if tax invoices are not issued or are issued late.
3. Transfer Pricing
FMCG companies within multinational groups commonly engage in related-party transactions, such as trademark royalty payments, intra-group services, and toll manufacturing arrangements.
PMK Number 172 of 2023 reinforces the application of the arm’s length principle (ALP) and provides a basis for the DGT to make adjustments where transfer pricing does not comply with the principle.
A primary adjustment may be followed by a secondary adjustment, which may be treated as a constructive dividend and potentially give rise to additional withholding tax obligations.
PMK Number 172 of 2023 allows the secondary adjustment to be cancelled provided that the taxpayer agrees to the primary adjustment determined by the tax auditor.
4. Coretax System Rollout
The migration to the Coretax System has transformed tax administration processes that previously relied on separate applications, such as e-Faktur and e-Bupot, into an integrated system.
Integration between the tax system and a company’s enterprise resource planning (ERP) system has therefore become increasingly important, particularly for FMCG companies with high transaction volumes. Inconsistencies between the ERP system and Coretax validation parameters may cause tax invoices to fail to issue.
The impact extends beyond tax compliance. Disruptions in tax invoice issuance can also delay sales and product deliveries, directly affecting the company’s supply chain operation.
Governance and Organizational Readiness
Regulatory changes and data-driven tax oversight prompt FMCG companies to improve their internal tax governance. One foundation is a tax control framework (TCF), which provides a tax risk management framework that integrates tax identification, calculation, and reporting processes with the company’s business operations.
Implementing TCF requires coordination across functions. Marketing and sales teams should involve the tax function when designing promotional programs and establishing trading terms. Contracts with distributors and modern retailers should also be reviewed from a tax perspective to ensure the appropriate Article 23 income tax treatment and compliance with nominative-list requirements.
Technology readiness also depends on the master data quality within the company’s ERP system. With Coretax’s real-time validation feature, companies must ensure data accuracy, including matching the 16-digit NIK or NPWP, taxable entrepreneur (pengusaha kena pajak/PKP) status, and VAT rates based on product classification.
Data discrepancies may cause the system to reject transactions or tax documents. Thus, regular data cleansing and validation are necessary to minimize the risk of disruptions to tax document issuance and commercial transactions.
How Tax Consultants Can Support
Regulatory complexity and the integration of tax and technology are driving FMCG companies’ need for tax consultants who can go beyond compliance and inform tax risks and business decisions.
One form of support is a tax review to identify potential risks at an early stage. This support may include reviewing the general ledger, particularly promotional and rebate accounts, as well as free product sample transactions, to ensure output VAT treatment complies with the applicable provisions.
Tax consultants can also support ERP integration with the Coretax system by mapping data structures and transaction processes. The objective is to ensure that data submitted to the tax system complies with its validation parameters and to minimize disruptions to tax document issuance.
During tax audits and disputes, consultants can help companies develop arguments based on the substance of the transactions and the applicable tax provisions. For disputes involving promotional expenses or trading terms, for instance, the analysis should demonstrate the connection between the expenditure and activities undertaken to earn, collect, and maintain income.
For related-party transactions, tax consultants can also help prepare transfer pricing documentation and comparability analyses. Adequate documentation supports the ALP application and mitigates the risk of adjustments under PMK Number 172 of 2023.
With integrated tax governance, reliable data, and appropriate tax advisory support, FMCG companies can manage compliance risks while anticipating the tax implications of their operations and business decisions.
If your company needs support in managing tax compliance and risks, Ideatax is ready to provide solutions tailored to your business needs.
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