Research by Arizton, titled Indonesia Data Center Market - Investment Analysis & Growth Opportunities 2026 - 2031, reports that Indonesia’s data center market was valued at USD 2.81 billion in 2025 and is projected to reach USD 6.08 billion by 2031, representing a compound annual growth rate (CAGR) of 13.73%. As of September 2025, Indonesia had 88 operational data center facilities and 25 facilities under construction. These facilities are spread across 17 cities, with Jakarta serving as the primary concentration hub.
The Coordinating Ministry for Economic Affairs reported that Indonesia’s operational data center capacity had reached approximately 580 megawatts (MW). Several global investors are also interested in adding up to 1.3 gigawatts (GW) of capacity, with estimated investments of USD 15 billion to USD 20 billion, or approximately IDR 244 trillion to IDR 325 trillion. If realized, this additional capacity would bring Indonesia’s total national capacity to approximately 1.88 GW.
The Ministry of Communication and Digital Affairs estimates the data center industry will grow about 14% annually through 2028, driven by growth in internet users, the adoption of artificial intelligence, and the expansion of submarine cable connectivity. The World Bank projects that demand for data centers in Indonesia could grow by up to 16.8% annually. Global players such as Equinix, Microsoft, NTT DATA, ST Telemedia Global Data Centres, and Princeton Digital Group are also contributing to investment growth in Indonesia’s data center sector.
Data center growth also has tax implications. Data center operators are generally subject to the tax provisions applicable to corporate taxpayers, including corporate income tax, Article 23 income tax, Article 4(2) final income tax, and value-added tax (VAT).
Corporate Income Tax
In general, income earned by companies in the data center industry is subject to corporate income tax under Article 17 of Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax, as amended by Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations. The standard corporate income tax rate is 22%.
Such income may arise from colocation services or the rental of server space and racks, cloud computing, hosting, and other information technology infrastructure management services.
Corporate income tax is imposed on a company’s taxable income or taxable profit. However, data center companies with gross turnover of up to IDR 50 billion may utilize the incentive under Article 31E, which provides a 50% reduction of the standard corporate income tax rate on the portion of taxable income attributable to gross turnover of up to IDR 4.8 billion.
Furthermore, tax provisions allow taxpayers to carry forward tax losses and claim depreciation or amortization on capitalized assets. For data center companies, such assets may include land, buildings, cooling systems, and server hardware. Accordingly, determining the appropriate asset group and useful life for depreciation purposes is important in calculating taxable income.
Article 23 Income Tax
Data center operations involve various service transactions that may be subject to Article 23 income tax. Under these provisions, Article 23 income tax is withheld at 2% of the gross amount for the rental of assets other than land and/or buildings, as well as fees for technical services, management services, construction services, and other services.
Services commonly subject to Article 23 income tax include equipment maintenance, security services, cleaning services, information technology consulting, and operational management services provided by third parties. The rental of generators and cooling systems should also be analyzed based on the characteristics of each transaction to determine the applicable withholding tax provisions.
Further provisions concerning services subject to Article 23 income tax are stipulated in Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 141/PMK/03/2015 concerning Other Types of Services as Intended in Article 23 Paragraph (1) Letter C Number 2 of Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax, as amended by Law of the Republic of Indonesia Number 36 of 2008.
Article 4(2) Final Income Tax
The rental of land and/or buildings for data center facilities is subject to Article 4(2) final income tax at 10% of the gross rental value, as stipulated in Government Regulation (Peraturan Pemerintah/PP) Number 34 of 2017 concerning Income Tax on the Rental of Land and/or Buildings. This provision is relevant because data center operations require land for buildings, server rooms, and electrical substations.
If a data center company sells land and/or buildings, the income from the transaction is subject to Article 4(2) final income tax at 2.5% of the sale value. Meanwhile, acquiring land and/or buildings triggers land and building acquisition duty, a regional tax.
Taxpayers, including companies in the data center industry, may also use the final income tax regime at 0.5% of gross turnover. Under PP Number 20 of 2026 concerning the Amendment of PP Number 55 of 2022 concerning Adjustments to Income Tax Regulations, taxpayers with annual gross turnover of up to IDR 4.8 billion may use this rate.
VAT
Corporate income tax and VAT have different tax bases. Income tax is imposed on income earned by taxpayers, while VAT is imposed on taxable goods or services supplied within the customs territory.
Services provided by data center operators, such as colocation, cloud computing, hosting, and other data management services, are generally classified as taxable services under the Law of the Republic of Indonesia Number 8 of 1983 concerning Value-Added Tax and Luxury-Goods Sales Tax, as amended by Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations.
For such supplies, VAT is calculated at 12% on a tax base equal to 11/12 of the consideration, in accordance with PMK Number 131 of 2024.
For instance, a data center company provides taxable cloud computing services with a billing value of IDR 12 billion in August. For the transaction, the company issues a tax invoice with a tax base of IDR 11 billion and VAT of IDR 1.32 billion.
If the service recipient is a non-resident taxpayer without a permanent establishment, and the service is used within the Indonesian customs territory, the service remains subject to VAT because it is used domestically. Conversely, the utilization of intangible taxable goods or services from abroad, such as software licenses for data center management, is also subject to VAT, which must be self-assessed and paid under the VAT procedure applicable to the utilization of services from abroad.
Specific Provisions
The government has not yet issued regulations specifically governing taxation in the data center industry. However, businesses in this sector may utilize tax incentives through the pioneer industry tax holiday scheme and special economic zones (SEZs).
Under Article 3(2) of PMK Number 130/PMK.010/2020 concerning the Provision of Corporate Income Tax Reduction, as amended by PMK Number 69 of 2024, the digital economy, including data processing, hosting, and related activities, is classified as a pioneer industry eligible for a tax holiday. Data center operators with an investment value of at least IDR 100 billion may apply for a corporate income tax reduction of up to 100%, depending on the investment value.
Data center operators investing in certain SEZs, such as Nongsa Digital Park SEZ in Batam, may also qualify for tax incentives under PMK Number 237/PMK.010/2020 concerning Taxation, Customs, and Excise Treatment in Special Economic Zones, as amended by PMK Number 33/PMK.010/2021.
Investments meeting certain thresholds in SEZs may qualify for tax holiday incentives, while investments that do not meet the requirements for a tax holiday may utilize tax allowance incentives. Businesses operating in SEZs may also receive VAT and luxury-goods sales tax (pajak penjualan atas barang mewah/PPnBM) exemptions on certain imported goods, import duty exemptions for equipment such as servers, and reductions in regional taxes and levies in accordance with the prevailing provisions.
Tax Incentives
Data center businesses may use several tax incentives to support investment and operational efficiency. First, a tax holiday is available for pioneer industries in the digital economy under PMK Number 130 of 2020, as amended by PMK Number 69 of 2024. This incentive provides a corporate income tax reduction of up to 100%, depending on the investment value and applicable requirements.
Second, PP Number 78 of 2019 provides a tax allowance. This incentive includes a reduction of net income equal to 30% of the investment value, accelerated depreciation and amortization, tax loss carryforward for up to 10 years, and a reduced income tax rate on dividends received by non-resident taxpayers, subject to the applicable requirements.
Third, tax incentives available in SEZs include tax holidays, import duty exemptions, and exemptions from VAT and PPnBM.
Fourth, import duty and VAT exemptions are available for machinery imports as well as goods and materials used for industrial development. These incentives are relevant to data centers, which require servers, storage systems, cooling systems, and other supporting equipment.
Fifth, super tax deductions are available for research and development activities as well as vocational and internship programs under PMK Number 128 of 2019 and PMK Number 153 of 2020. Each incentive must meet the administrative and substantive requirements in the relevant regulations to avoid incentive withdrawal or additional tax liabilities.
Conclusion
Indonesia’s data center industry is subject to tax obligations that generally follow the prevailing tax provisions, including corporate income tax, Article 23 income tax, Article 4(2) final income tax on the rental of land and/or buildings, and VAT. To date, no tax provisions specifically address the data center industry's comprehensive characteristics.
Meanwhile, the government provides several fiscal incentives that businesses in the sector may use, including tax holidays for pioneer industries in the digital economy, tax allowances, and SEZ incentives.
The government should provide clearer tax guidance for the data center industry, particularly regarding the classification of services, the cross-border utilization of taxable services, and the depreciation of high-value infrastructure assets.
Businesses should map their tax obligations and available incentives from the investment planning stage. This assessment is essential to determine an efficient investment and transaction structure that remains compliant with tax regulations. Ideatax can assist businesses with tax assessments and advisory services relating to data center investments and operations.
Legal References
- Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax, as amended by Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations.
- Law of the Republic of Indonesia Number 8 of 1983 concerning Value-Added Tax and Luxury-Goods Sales Tax, as amended by Law of the Republic of Indonesia Number 7 of 2021 concerning the Harmonization of Tax Regulations.
- Government Regulation Number 78 of 2019 concerning Income Tax Incentives for Investment in Certain Business Sectors and/or Regions.
- Government Regulation Number 34 of 2017 concerning Income Tax on the Rental of Land and/or Buildings.
- Government Regulation Number 20 of 2026 concerning Amendments to Government Regulation Number 55 of 2022 concerning Adjustments to Income Tax Regulations.
- Minister of Finance Regulation Number 141/PMK.03/2015 Other Types of Services as Intended in Article 23 Paragraph (1) Letter C Number 2 of Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax, as amended by Law of the Republic of Indonesia Number 36 of 2008.
- Minister of Finance Regulation Number 130/PMK.010/2020 concerning the Provision of Corporate Income Tax Reduction, as amended by Minister of Finance Regulation Number 69 of 2024.
- Minister of Finance Regulation Number 237/PMK.010/2020 concerning Taxation, Customs, and Excise Treatment in Special Economic Zones, as amended by Minister of Finance Regulation Number 33/PMK.010/2021.
- Minister of Finance Regulation Number 131 of 2024 concerning the Treatment of Value-Added Tax on the Importation of Taxable Goods, Supply of Taxable Goods, Supply of Taxable Services, Utilization of Intangible Taxable Goods from Outside the Customs Territory within the Customs Territory, and Utilization of Taxable Services from Outside the Customs Territory within the Customs Territory.
- Minister of Finance Regulation Number 128/PMK.010/2019 and Minister of Finance Regulation Number 153/PMK.010/2020 concerning Gross Income Reduction for Apprenticeships, Internships, and/or Learning Activities and Certain Research and Development.
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