Indonesia: tax holiday rule revamped and erased


The Indonesian Minister of Finance recently issued Regulation No.35/PMK.010/2018 (PMK-35), introducing a new concept of tax holiday. PMK-35 has been in effect since its enactment on April 4th, 2018. The modified regulation aims at inviting investors to make new investments in Indonesia’s ‘pioneer industries’, with the incentive of a 100% relief of corporate income tax for up to 20 years.


How to get qualified?

To benefit from the tax incentive, investors need to meet the following requirements:

  1. Engage in “pioneer industry”;
  2. Applicable for both, new investment or expansion;
  3. Minimum investment volume of IDR 500 billion (approx. US$ 37 million);
  4. Compliance with debt-to-equity ratio for taxation purposes;
  5. No previous request for tax exemption has ever been rejected; and
  6. Indonesian legal entity.

The Minister of Finance is supposed to come to a decision within 5 working days.


What are Pioneer Industries?

There are 17 pioneer industries as mentioned in PMK-35, which are categorized as follows:

  1. Upstream basic metals;
  2. Oil and gas purification;
  3. Natural-gas-based petrochemicals;
  4. Inorganic basic chemicals;
  5. Organic basic chemicals;
  6. Pharmaceutical raw materials;
  7. Semiconductors and other computer components;
  8. Telecommunication;
  9. Medical equipment;
  10. Industrial machinery;
  11. Vehicle machinery;
  12. Robotic components for industrial machinery;
  13. Ship components;
  14. Aircraft components;
  15. Train components;
  16. Power plant machinery;
  17. Economic infrastructure.

Further industrial sectors, which are not explicitly categorized as Pioneer Industry, may also qualify for the tax incentive, provided the investor meets the above requirements. In these cases, the governmental Capital Investment Coordinating Board (BKPM) will call for an inter-ministerial meeting to examine the application.


What is the benefit?

The benefit is a 100% relief of corporate income tax. The tax relief duration depends on the investment volume:

Period of Tax Relief
(in Years)

Investment Volume

(in Rupiah)

5 500 billion up to less than 1 trillion
7 1 trillion up to less than 5 trillion
10 5 trillion up to less than 15 trillion
15 15 trillion up to less than 30 trillion
20 More than 30 trillion


​Once investors have been granted the exemption, their tax liability will be reduced by 100%, and none of their income will be subject to withholding tax for the corresponding period.


After the tax holiday period has expired (transition period), investors can still enjoy a 50% reduction for the next 2 years.


The tax relief may be revoked if investors are found to show the following characteristics:

  1. The actual investment volume amounts to less than IDR 500 billion;
  2. There is inconsistency in the realization of the investment plan;
  3. Investors import or procure second-hand capital goods, unless these goods are cumulated as one package and can only be sourced abroad;
  4. Investors do not operate in accordance with their business activities as stipulated in the plan;
  5. Investors transfer investment assets, unless done for efficiency purposes; and/or
  6. Investors relocate new investments outside Indonesia.


Contact Person Picture

Markus Schlüter


+49 221 9499 093 42

Send inquiry

Deutschland Weltweit Search Menu