Indonesian tax update: regulation issued on pillar two alignment

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Indonesian tax update: regulation issued on pillar two alignment

Sponsored by

sponsored-firms-gnv.png
Red Castle, Jakarta

Aditya Wicaksono and Yoan Putra Muda of GNV Consulting report on the country addressing the global minimum tax, and a streamlining of the procedures used for tax corrections, objections, reductions, eliminations, and cancellations

In response to the implementation of the OECD’s pillar two framework, the Indonesian government has issued Ministry of Finance Regulation No. 136/PMK.03/2024 (PMK-136) to align with global efforts to enforce a minimum 15% effective tax rate for multinational enterprises (MNEs). The regulation aims to address profit shifting and ensure fair tax practices among MNE groups.

PMK-136 covers, among other aspects:

  • The criteria for application of the global minimum tax (GMT) rules;

  • The implementation of a domestic minimum top-up tax;

  • The application of income inclusion rules; and

  • The application of undertaxed payment rules.

The GMT rules apply to constituent entities of MNE groups that meet the following criteria:

  • Annual gross turnover of at least €750 million, based on the consolidated financial statements of the ultimate parent entity; and

  • The turnover threshold must be met in at least two of the four tax years preceding the fiscal year in question.

Entities exempt from the GMT rules include government bodies, international organisations, non-profit organisations, pension fund entities, and certain investment vehicles.

The GMT rules took effect on January 1 2025. For fiscal years ending December 31 2025, the filing deadline will be June 30 2027.

Procedures for tax corrections, objections, reductions, eliminations, and cancellations

In an effort to further streamline and improve the regulatory framework that governs the taxation sector, the Indonesian minister of finance has issued Regulation No. 118 of 2024 (PMK-118) on Procedures for Tax Corrections, Objections, Reductions, Eliminations and Cancellations (collectively, Taxation Procedures), which has been in force since January 1 2025.

The regulation summarises the new provisions on Taxation Procedures that have been introduced under the framework of PMK-118, such as the following.

Procedures for corrections

Generally, the previous rules related to procedures for correction were regulated by Ministry of Finance Regulation No. 11 of 2013. In PMK-118, the scope of the misapplication of provisions that are eligible to be corrected is expanded to include the following:

  • The application of exchange rates;

  • The application of the percentage of taxable sales value;

  • The application of non-taxable taxable object sales value; and

  • The granting of a reduction in the principal of land and building tax (PBB).

PMK-118 features several new provisions that address the authority of the Directorate General of Taxes (DGT) to investigate any errors that underlie a correction request. This authority includes the ability to request documents, data, information, and/or explanations from the taxpayer concerned and to conduct on-site reviews for the purposes of identification, measurement, mapping, and the gathering of data, information, or evidence.

Procedures for the submission and settlement of objections

PMK-118 consolidates and retains the applicable provisions on objections, as previously regulated under the now-revoked frameworks of Regulation No. 9/2013 and Regulation No. 253/2014. When requested by taxpayers for the purpose of filing objections or appeals, the DGT is now required to issue certificates that detail the basis for the imposition of tax, loss calculations, or tax withholding/collection. Said certificates must be provided to the relevant taxpayers within one month of any such request being submitted, although it should be noted that the objection filing period itself cannot be extended.

PMK-118 also clarifies that if there is to be a legal ruling on a notification letter, then the original 12-month period provided to resolve an objection will be suspended until the ruling is issued. Moreover, any taxpayer objections that are rejected or partially granted will now be subject to an administrative fine of 30% of the tax amount based on the objection decision letter, which is lower than the 50% fine that was previously stipulated under Regulation No. 9/2013.

Procedures for the submission and settlement of imposed penalties

PMK-118 retains and clarifies provisions from the now-revoked Regulation No. 8/2013 and Regulation No. 81/2017. Particularly, PMK-118 clarifies the authority of the DGT to reduce or eliminate administrative penalties on an ex officio basis (secara jabatan) in cases of taxpayer errors or circumstances beyond their control. Penalties eligible for reduction or elimination include:

  • An interest penalty;

  • Fines;

  • Increases in PBB rates; or

  • An administrative penalty related to PBB.

This clarification provides more structured guidelines for taxpayers seeking relief from administrative penalties.

Transitional provisions

Given the number and extent of the regulatory frameworks that were repealed by PMK-118, the following provisions will apply to applications and/or submissions already in progress, to ensure a smooth transition to the new framework.

In-progress applications and/or submissions

Applicable transitional provision

Correction requests that were submitted prior to the enforcement of PMK-118 for which the relevant correction decision letters have not yet been issued

Will continue to be processed in line with Regulation No. 11 of 2013 until the issuance of the relevant correction decision letters

Objection submissions that were filed prior to the enforcement of PMK-118 and for which the relevant objection decision letters have not yet been issued

Will continue to be processed in line with Regulation No. 9 of 2013 until the issuance of the relevant objection decision letters

Applications for reduction, deletion, or cancellation of (i) administrative penalties, (ii) an incorrect tax assessment notice (SKP), (iii) an incorrect tax collection notice, and (iv) SKP and PBB SKP examination results that were received prior to the enforcement of PMK-118 and for which the relevant decision letters have not yet been issued

Will continue to be processed in line with Regulation No. 8 of 2013 until the issuance of the relevant decision letters

Administration of requests for correction, reduction, elimination, cancellation, and objection that were submitted prior to the enforcement of PMK-118 and that remain unresolved

Will be processed in line with PMK-118


Furthermore, the formats of the various letters and documents that specifically relate to Taxation Procedures, as stipulated under the now-revoked frameworks, have been comprehensively updated under the appendices to PMK-118.

more across site & shared bottom lb ros

More from across our site

Effective audit management requires more than documentation; it’s the way taxpayers engage that can shape audit direction, manage procedural ambiguity, and preserve options for appeal or litigation
American advisers are falling short of client expectations when it comes to providing value-added services, but remaining tight-lipped won’t make the problem go away
Awards
The Social Impact Awards unveil new categories to reflect a changing legal and social landscape
Australia's approach to tax policy has undergone significant shifts in recent years, reflecting global trends and unique domestic considerations. These developments merit close attention from tax professionals
The UK has temporarily dodged the 50% rate due to a trade deal signed with the US in May; in other news, Ryan acquired a Northern Irish tax firm
Following a $28 million funding round, Aibidia wants to ‘double down’ on the US market via partnerships with the ‘big four’, the Finnish TP tech provider’s CEO tells ITR
The Luxembourg-based TP leader tells ITR about relishing the intellectual challenge of his practice, his admiration for Stephen Hawking, and what makes tax cool
The case to determine whether the tariff regime is constitutional will eventually find its way to the US Supreme Court, ITR has also heard
In other news, the Council of the EU pledged support to a CBAM simplification and exemption initiative, and Portugal issued new VAT filing guidance
While Brazil’s sweeping tax updates are a triumph for modernisation, Giuliano Gioia of Sovos warns that MNEs with a Brazilian footprint should be prepared for a short and sharp adjustment
Gift this article