Indonesia Introduces New Opportunity for Taxpayers to Obtain Administrative Tax Sanction Relief
Businesses with outstanding tax liabilities may now have a new opportunity to reduce or eliminate certain administrative tax sanctions.
The Indonesian Government has recently introduced a tax relief framework through Minister of Finance Regulation No. 71 of 2026 (“PMK 71/2026”) and Director General of Taxes Decision No. KEP-239/PJ/2026 (“KEP-239/2026”). The policy is intended to encourage taxpayers to resolve outstanding tax obligations by providing relief from certain administrative sanctions, subject to specific requirements and deadlines.
For businesses, the new framework is particularly relevant where there are outstanding tax assessments or collection letters, historical underpayments, late tax filings or payments, or tax returns that may need to be corrected. It may therefore provide an opportunity for companies to revisit existing tax exposures and assess whether part of the financial burden associated with those exposures can be reduced.
PMK 71/2026 became effective on 2 October 2026, while KEP-239/2026 provides the more specific conditions for taxpayers wishing to make use of the relief. Together, the two regulations provide both the general legal framework and the practical parameters for the new relief policy.
What Has Changed?
One of the most important changes concerns how tax payments are allocated.
Under the new framework, payments made in connection with a Tax Assessment Letter (Surat Ketetapan Pajak or “SKP”) or Tax Collection Letter (Surat Tagihan Pajak or “STP”) are applied first to the outstanding tax principal. Any amount paid in excess of the principal is then applied toward the administrative sanction. A similar approach applies to relevant Land and Building Tax (Pajak Bumi dan Bangunan or “PBB”) liabilities.
This represents an important change in how payments are treated. By prioritizing the underlying tax principle, the new approach provides a clearer separation between the taxpayer’s substantive tax obligation and the administrative sanction imposed in connection with that obligation.
For taxpayers, this distinction is particularly relevant when considering whether an outstanding sanction may qualify for reduction or waiver under the new policy.
In practical terms, businesses with existing tax liabilities should therefore review not only the total amount stated in their tax assessment or collection letter, but also how much relates to the underlying tax principal and how much represents administrative sanctions. Previous payments may also need to be reviewed to determine how they should be allocated under the new framework.
This exercise may be particularly important where a company has made partial payments against an existing assessment, as the remaining sanction potentially eligible for relief will depend on the treatment of those payments.
Who May Benefit from the Relief?
The new policy covers several circumstances that may commonly arise in the course of a company’s tax compliance.
For example, relief may be available for administrative sanctions resulting from the late filing of annual income tax returns up to Fiscal Year 2025 or periodic tax returns up to the September 2026 Tax Period, where the relevant return shows an underpayment.
The policy may also apply where a taxpayer voluntarily corrects an annual or periodic tax return that results in additional tax payable, as well as where the taxpayer has been late in paying or remitting tax reported in those returns. For these categories, the relevant filing and payment activities generally must take place between 8 October 2026 and 30 June 2027.
This aspect of the policy may be particularly relevant for businesses conducting an internal tax review and identifying historical reporting issues. Rather than waiting for such matters to develop into a larger tax exposure, companies may wish to assess whether voluntarily addressing the relevant filing or payment issue within the prescribed period could allow the related administrative sanction to fall within the relief framework.
The opportunity is not limited to tax-return related sanctions.
Certain administrative sanctions arising from tax audits and existing tax assessments or collection letters may also qualify. This includes certain SKPs, PBB assessments, and STPs issued between 8 October 2026 and 30 June 2027, subject to the applicable payment requirements.
Certain tax assessments or collection letters that were already issued before 8 October 2026 may also fall within the policy where the relevant payment requirements are satisfied by 30 June 2027.
This means that businesses should not assume that the policy is relevant only to new tax issues. Companies with existing or historical tax liabilities may also have an opportunity to benefit from the relief. For businesses with several outstanding tax matters, this may justify a broader review of existing assessments and collection letters rather than considering only recently issued tax documents.
A separate timeline applies to certain assessments relating to assets that were not or were insufficiently disclosed under Indonesia’s Voluntary Disclosure Program (Program Pengungkapan Sukarela). For this category, the relevant period extends until 31 December 2027
Not All Administrative Sanctions Are Eligible
Although the relief framework is relatively broad, it does not apply to every administrative tax sanction.
In particular, certain sanctions arising following unsuccessful objection, appeal, or judicial review proceedings are excluded from the general reduction or waiver mechanism introduced under
Accordingly, eligibility will depend on the circumstances of each tax liability. Businesses should review the underlying tax document and the basis on which the sanction was imposed rather than assuming that every outstanding penalty will qualify.
This is especially important for companies with several outstanding SKPs or STPs, as different liabilities of the same taxpayer may receive different treatment under the new framework. An assessment should therefore generally be conducted on a document-by-document basis, taking into account the type of sanction, the relevant tax period, the date of issuance, and the status of the underlying liability.
In other words, the existence of an outstanding administrative sanction is only the starting point. Whether the relief is actually available will depend on whether the specific sanction and the circumstances surrounding it satisfy the applicable requirements.
Relief Must Be Applied For
Another important point for businesses is that the relief is not automatic.
Eligible taxpayers must submit an application to the Directorate General of Taxes (“DGT”). Under KEP-239/2026, the application must be submitted no later than 1 October 2028.
The taxpayer must also satisfy the applicable conditions. Among others, the taxpayer must provide a statement explaining that the administrative sanction arose due to an oversight or circumstances not attributable to the taxpayer’s fault.
The policy also requires taxpayers to consider any ongoing legal remedies. Where a lawsuit or other legal remedy has already been pursued in relation to the relevant matter, it must be withdrawn if the taxpayer wishes to apply for the relief, with the relevant withdrawal documentation submitted as part of the application.
Importantly, the relief applies only to administrative sanctions that have not already been paid or fully settled.
These requirements mean that businesses should consider the relief before deciding how to proceed with an outstanding tax matter. For example, where a company is currently considering payment, further legal remedies, or another course of action in response to a tax assessment, the potential availability of sanction relief should form part of that decision-making process.
For businesses currently considering whether to challenge a tax matter or settle the underlying liability and seek sanction relief, the available options should therefore be assessed before taking further action. Once certain payments have been made or legal remedies pursued, the company’s position under the relief framework may be affected.
The Timing Matters
Businesses should pay particular attention to the different deadlines under the new framework.
The 30 June 2027 deadline applies to many of the filing, payment, and assessment circumstances covered by KEP-239/2026. The 1 October 2028 deadline, on the other hand, relates to the submission of the application for administrative sanction relief itself. Certain cases relating to the Voluntary Disclosure Program are subject to a separate 31 December 2027 timeline.
These dates should therefore not be treated as interchangeable.
A company may have until 1 October 2028 to submit its relief application, but it may first need to complete the relevant filing or payment much earlier in order to qualify. Waiting until close to the application deadline before reviewing eligibility could therefore be too late if an earlier qualifying requirement has not been satisfied.
For this reason, the practical deadline for a business may be considerably earlier than the final application deadline. Companies should identify the relevant category applicable to each outstanding tax matter and work backwards from the corresponding filing, payment, or assessment deadline.
What Should Businesses Do Now?
The new framework provides businesses with an opportunity to reassess outstanding tax liabilities and determine whether administrative sanctions that would otherwise remain payable may qualify for relief.
Companies may therefore wish to review their outstanding SKPs, STPs, PBB assessments, historical underpayments, late filings, and tax returns requiring correction. For each item, it will be important to identify the underlying tax principal, the administrative sanction imposed, the relevant tax period, the date of the assessment or collection letter, payments already made, and whether any objection or other legal proceeding remains ongoing.
Companies that have identified potential errors or underpayments in previous tax filings may also wish to assess whether those matters fall within the periods covered by KEP-239/2026. This is particularly relevant because the policy extends beyond sanctions already stated in existing assessments and also addresses certain circumstances involving late filing, voluntary correction, and late payment.
An early review may be particularly beneficial for companies with multiple outstanding tax matters. Although the application deadline extends to 1 October 2028, several of the underlying requirements must be satisfied substantially earlier.
Businesses should also avoid approaching all outstanding tax liabilities in the same manner. One assessment may qualify for relief while another may fall outside the policy because of its legal basis, timing, payment status, or dispute history. A targeted review can therefore help identify which liabilities should be prioritized.
The new policy ultimately presents a time-limited opportunity for eligible taxpayers to resolve outstanding tax matters while potentially reducing the administrative sanctions attached to them. Businesses with existing tax exposures should consider assessing their eligibility before making further payments or pursuing additional legal remedies, as these actions may affect the relief available.
Taking an early and structured approach may allow businesses not only to identify potential relief but also to plan the settlement of outstanding tax obligations with greater certainty before the applicable deadlines expire.