Tax Brief PMK 71/2026: Changes to Tax Objection Procedures and Sanctions

The Ministry of Finance (MoF) has issued Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 71 of 2026 on Amendments to PMK Number 118 of 2024 concerning Procedures for Corrections, Objections, Reductions, Waivers, and Cancellations in Taxation.

PMK 71/2026 took effect on October 2, 2026. The regulation introduces several changes to the tax objection process, including the Directorate General of Taxes’ (DGT) authority to collect information, deadlines for submitting documents, and mechanisms for taxpayers to respond.

Changes to Tax Objection Review Mechanism

One of the changes introduced under PMK 71/2026 is contained in Article 14, which governs the review of tax objections. The DGT has broader authority to obtain data and information required in the objection review process.

Under Article 14 paragraph (2), the DGT may take the following actions:

1. Request books, records, data, and/or information from taxpayers through a written request for the submission of documents.
2. Request written and/or oral explanations from taxpayers through a request for information.
3. Request explanations or evidence related to the subject matter of the objection from third parties.
4. Summon taxpayers for discussions and clarification, which are documented in Minutes of Meeting.
5. Conduct an examination for other purposes in connection with the objection, in accordance with tax laws and regulations.
6. Conduct valuations of assets or transactions related to the subject matter of the objection.
7. Conduct site visits to the taxpayer’s premises, the location of the tax object, or other locations as necessary to identify, measure, map, and collect evidence.
8. Conduct an Exchange of Information (EoI) for tax purposes with tax authorities of partner countries or jurisdictions.

The EoI provision allows the DGT to obtain information from tax authorities in partner countries or jurisdictions during the objection review process. This provision is particularly relevant to disputes involving cross-border transactions, related-party transactions, transfer pricing, and the determination of beneficial ownership.

Deadlines for Submitting Documents

PMK 71/2026 also sets deadlines for taxpayers to fulfill requests for data and information during the objection review process.

The deadlines are calculated from the date the relevant letter is sent. Taxpayers therefore need to monitor letters and notifications delivered through the tax administration system, including Coretax.

If the requested documents cannot be submitted, the taxpayer must provide a Statement of Non-Ownership in accordance with the applicable provisions. If a request for data is not fulfilled, the DGT may proceed with the review based on the available data.

Mechanism for Responding to Objection Review Results

PMK 71/2026 also amends the provisions governing taxpayers’ responses before the DGT issues an Objection Decision Letter.

Under Article 16, the DGT sends a Notice to Attend (Surat Pemberitahuan untuk Hadir/SPUH) to the taxpayer. The SPUH is accompanied by a notification containing the list of objection review findings and a response form.

Taxpayers have the following rights and obligations at this stage:

1. The review findings are not yet final. The list of objection review findings provided through the SPUH does not constitute a binding administrative decision.
2. Taxpayers may still submit a response. If they do not attend the invitation in person or virtually, taxpayers may still submit a Response to the Objection Review Findings.
3. The response must be submitted within 10 working days. The period is calculated from the date the SPUH is sent.
4. Minutes of Non-Attendance may be prepared. If a taxpayer fails to attend and does not submit a response by the deadline, the DGT will prepare Minutes of Non-Attendance and proceed with the objection resolution process.
5. The rights may be exercised through an authorized representative. Taxpayers may authorize a representative to attend the discussion process or sign the response letter. Fulfillment of the taxpayer’s obligations by an authorized representative is deemed to constitute fulfillment of the taxpayer’s obligations.
    

With these changes, taxpayers need to pay close attention to every data request and SPUH issued by the DGT. Monitoring correspondence through the tax administration system and meeting the applicable deadlines have become important aspects of the objection resolution process.

Reduction and Waiver of Administrative Tax Sanctions

PMK 71/2026 amends the provisions governing the reduction and waiver of administrative tax sanctions, including the types of sanctions that may be subject to an application and the payment allocation mechanism.

Types of Sanctions Eligible for Reduction or Waiver

Article 21A sets out the types of administrative sanctions that taxpayers may apply to the Directorate General of Taxes (DGT) for reduction or waiver, namely:

• Administrative sanctions imposed under a Tax Assessment Letter (Surat Ketetapan Pajak/SKP).
• Administrative sanctions imposed under a Tax Collection Letter (Surat Tagihan Pajak/STP) issued as a follow-up to an SKP.
• Administrative sanctions imposed under an STP unrelated to an SKP.
• Administrative fines for Land and Building Tax (Pajak Bumi dan Bangunan/PBB) imposed under a PBB Tax Assessment Letter.
• Administrative fines for PBB imposed under a PBB Tax Collection Letter.

However, three types of sanctions imposed under an STP are not eligible for reduction or waiver:

1. A sanction under Article 25 paragraph (9) of the General Tax Provisions and Procedures Law (KUP Law), in the form of a 30% penalty when a taxpayer’s objection is rejected or only partially granted.
2. A sanction under Article 27 paragraph (5d) of the KUP Law, in the form of a 60% penalty when a taxpayer’s appeal is rejected or only partially granted by the Tax Court.
3. A sanction under Article 27 paragraph (5f) of the KUP Law, in the form of a 60% penalty when a taxpayer’s application for judicial review (Peninjauan Kembali/PK) is rejected by the Supreme Court.

Accordingly, these three types of sanctions are not covered by the administrative sanction reduction or waiver facilities under PMK 71/2026.

Payments Prioritized for Outstanding Principal Tax

PMK 71/2026 also changes the payment allocation mechanism for SKPs, STPs, PBB Tax Assessment Letters, and PBB Tax Collection Letters. Under Article 23 paragraphs (6) and (7), taxpayer payments are first allocated toward the outstanding principal tax.

Administrative sanctions or PBB administrative fines are only taken into account after the principal tax has been fully paid.

For example, a taxpayer has an Tax Underpayment Assessment Letter (SKP Kurang Bayar/SKPKB) with the following amounts:

• Principal tax: IDR 100 million
• Administrative sanction: IDR 40 million
• Total amount due: IDR 140 million

Under this mechanism, payments are first used to settle the outstanding principal tax. Once the principal tax has been fully paid, the remaining administrative sanctions may be subject to an application for reduction or waiver, subject to the applicable requirements.

Requirements for Applying for a Sanction Reduction

Taxpayers must meet several requirements to apply for a reduction or waiver of administrative sanctions, as follows:

1. The principal tax or principal PBB amount on which the sanction is imposed must have been fully paid.
2. The taxpayer must not have an objection application pending. If an objection was previously filed, it must have been withdrawn and the withdrawal approved by the DGT, or the objection must have been deemed inadmissible for consideration.
3. The taxpayer must not have a pending application for the reduction or cancellation of an incorrect SKP/STP under Article 36 paragraph (1) letter b or letter c of the KUP Law.
4. The taxpayer must not have a pending application for the cancellation of an SKP issued following an audit under Article 36 paragraph (1) letter d of the KUP Law.
5. The application must be submitted in writing in Indonesian, state the amount of the sanction according to the taxpayer’s calculation, and provide the grounds for the application.
6. Each application may cover only one SKP, one STP, or one PBB SKP/STP.
7. The application must use the format set out in Annex C to PMK 71/2026.
8. The application must be submitted before the DGT requests the auction of seized assets or requests the transfer of seized assets as part of active tax collection.

Relaxation of Administrative Sanctions under Article 27A

PMK 71/2026 also grants the DGT authority to reduce or waive administrative tax sanctions and PBB administrative fines as part of efforts to support the national economy. Article 27A sets out the relevant requirements.

First, the facility is available upon application by the taxpayer. The reduction or waiver of sanctions is not granted automatically through Coretax. Second, taxpayers must still pay the entire principal tax amount. The facility applies only to administrative sanctions and does not eliminate the underlying tax debt.

Third, the facility is subject to a deadline. An application under Article 27A may be submitted no later than two years after PMK 71/2026 takes effect. Accordingly, the final deadline for submission is October 2, 2028.

Taxpayers with administrative sanctions that meet the applicable requirements can reconcile their tax obligations, settle the principal tax, and submit an application for the reduction or waiver of sanctions within the specified period.

Exception for PBB Fine Reductions in Cases of Natural Disasters

PMK 71/2026 provides an exception to the requirements for applying for a reduction of PBB administrative fines when a tax object is affected by a disaster. Under Article 23 paragraph (4), the exception applies to tax objects affected by:

• Natural disasters, such as earthquakes, floods, and tsunamis.
• Non-natural disasters, such as epidemics and technological failures.
• Social disasters, such as social conflicts.

In such circumstances, certain requirements for applying for a sanction reduction do not apply. Taxpayers are not required to withdraw an objection or certain pending applications solely to apply for a reduction of PBB administrative fines.

The provision provides administrative relief for taxpayers whose tax objects have been affected by disasters.

Limits on Applications for the Cancellation of Tax Assessment Letters

Taxpayers that receive an SKP, SPPT, or PBB Tax Assessment Letter that was not issued in accordance with applicable provisions may apply to the Directorate General of Taxes (DGT) for a reduction or cancellation under Article 36 paragraph (1) letters b and c of the General Provisions and Procedures of Taxation (Ketentuan Umum dan Tatacara Perpajakan/KUP) Law.

PMK 71/2026 limits such applications to prevent repeated filings. The provisions are as follows:

1. A maximum of two applications. An application for a reduction or cancellation may be submitted no more than twice for the same type of tax assessment.
2. No application after an objection has been withdrawn. A taxpayer may not submit an application if they previously filed an objection, subsequently withdrew it, and the withdrawal was approved by the DGT.
3. Second application within three months. If the first application is rejected or only partially granted, the taxpayer may submit a second application no later than three months from the date the DGT sends the decision letter on the first application.
4. Exception for force majeure. The three-month deadline may be extended if the taxpayer can prove that the delay was caused by force majeure. The administrative requirements for the second application must still be fulfilled.

Transitional Provisions

PMK 71/2026 also governs applications submitted before the regulation took effect. Article 21A prohibits the reduction or waiver of administrative sanctions imposed under STPs issued based on objection decisions, appeal decisions, and judicial review (Peninjauan Kembali/PK) decisions.

However, this provision does not apply to applications received by the DGT before October 2, 2026. Such applications will continue to be processed under the previous provisions, namely PMK Number 118 of 2024.

Accordingly, applications received by the DGT before PMK 71/2026 took effect will continue to be processed under the provisions in force when the applications were submitted.

Document Formats under PMK 71/2026

PMK 71/2026 sets out document formats to be used in administrative processes between the DGT and taxpayers. The formats are provided in the annexes to PMK 71/2026. Documents for which formats have been prescribed include:

• Applications for the reduction or waiver of administrative sanctions.
• Letters returning applications when the requirements have not been met.
• Notice of Site Inspection (Surat Pemberitahuan Peninjauan Lokasi/SPPL).
• DGT decisions on first and second applications.

Taxpayers should ensure that submitted documents meet all applicable requirements and use the formats prescribed under PMK 71/2026.

Key Points for Taxpayers

The changes introduced by PMK 71/2026 require taxpayers to adjust their tax administration processes. Several key points should be noted:

1. Ensure consistency in tax data. Taxpayers with transactions involving related parties overseas need to ensure that their transfer pricing data and documentation, including the Master File, Local File, and Country-by-Country Report (CbCR), are consistent with information reported in partner jurisdictions. The DGT may use Exchange of Information (EoI) in the objection review process.
2. Monitor Coretax regularly. Taxpayers need to monitor letters and notifications from the DGT through Coretax, as several deadlines are calculated from the date a letter is sent. The deadline for responding to the first data request is 15 working days, while responses to an SPUH must be submitted within 10 working days.
3. Make use of the sanction reduction facility. Taxpayers with administrative sanctions can identify eligible tax liabilities, settle the principal tax, and apply for a reduction or waiver of sanctions in accordance with Article 27A. The facility is available for up to two years from the effective date of PMK 71/2026, or until October 2, 2028.
4. Check the requirements before submitting an application. Taxpayers should ensure that there are no pending objection applications or other applications that could prevent them from applying for the cancellation or reduction of a tax assessment. Taxpayers should also take note of the maximum of two applications and the three-month deadline for submitting a second application.

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