The Indonesian minister of finance has issued Regulation No. 71 of 2026 (PMK 71/2026), amending PMK 118/2024 on procedures for rectifying, objecting to, reducing, or waiving administrative penalties, and reducing or cancelling tax assessments. The regulation came into effect on October 2 2026.
The amendments introduce a principal-first payment allocation mechanism for administrative penalty relief, clarify the categories of penalties eligible for reduction or waiver, and modify certain procedural requirements concerning tax objections and incorrect assessments. The regulation also establishes the legal basis for a temporary administrative penalty relief programme intended to support national economic growth.
Principal-first allocation of payments for administrative penalty relief
Under the amended Article 23, paragraphs 6 and 7, the principal-first allocation mechanism applies to payments made against:
A tax assessment letter (surat ketetapan pajak, or SKP);
A tax collection letter (surat tagihan pajak, or STP);
A land and building tax assessment letter (surat ketetapan pajak pajak bumi dan bangunan, or SKP PBB); or
A land and building tax collection letter (surat tagihan pajak pajak bumi dan bangunan, or STP PBB).
In the context of an application for administrative penalty relief, such payments are allocated first to the outstanding tax principal.
Only payments exceeding the outstanding principal are allocated to administrative penalties or PBB administrative fines. This represents a change from the previous proportional allocation mechanism under PMK 118/2024, whereby payments could be allocated proportionately between the principal tax liability and the associated administrative penalties.
The amendment provides greater flexibility for taxpayers seeking administrative penalty relief because payments are first recognised as settlement of the principal tax liability, an important condition for submitting a penalty reduction or waiver application.
However, any payment exceeding the outstanding principal is allocated to administrative penalties. Consequently, taxpayers should distinguish between the principal amount that must be settled and any outstanding penalties that may qualify for a reduction or waiver. The amended allocation mechanism applies within the framework of Article 23. It should not be interpreted as a general rule governing the allocation of all tax payments.
Clarification of administrative penalties eligible for reduction or waiver
The newly introduced Article 21A expressly identifies the administrative penalties that may be reduced or waived, including:
Administrative penalties stated in an SKP;
Administrative penalties stated in an STP associated with the issuance of an SKP, subject to specific exclusions;
Administrative penalties stated in other STPs;
PBB administrative fines stated in an SKP PBB; and
PBB administrative fines stated in an STP PBB.
Importantly, Article 21A excludes administrative penalties stated in STPs issued under Article 25, paragraph 9; Article 27, paragraph 5d; and Article 27, paragraph 5f of the General Tax Provisions and Procedures Law. These provisions concern sanctions associated with unsuccessful objection or appeal proceedings.
Accordingly, the availability of administrative penalty relief depends not only on the document in which the penalty is imposed but also on the statutory provision underlying that penalty.
Transitional provision
Applications for a reduction or waiver of the excluded STP sanctions received before October 2 2026 and still undecided on that date continue to be processed under PMK 118/2024 as it existed before amendment.
This transitional treatment is particularly relevant to taxpayers with pending applications concerning sanctions arising from objection or appeal proceedings.
Written responses to objection review results
The amended Article 16, paragraph 5 provides that taxpayers who elect not to attend the discussion of the objection review results may submit a written response within 10 working days after the date on which the invitation to attend letter (surat pemberitahuan untuk hadir, or SPUH) is dispatched.
Previously, the 10-working-day period was calculated from the date the SPUH was dispatched. Under the amended provision, the dispatch date is excluded from the calculation. Consequently, although the prescribed response period remains 10 working days, the amendment effectively grants taxpayers one additional working day to prepare and submit their written rebuttal to the objection review findings.
Special policy for administrative penalty reduction or waiver to support economic growth
Another significant amendment introduces Article 27A, which grants the director general of taxes authority to reduce or waive administrative sanctions and PBB administrative fines as part of the government’s efforts to support national economic growth.
This provision is further implemented through Director General of Taxes Decree No. KEP-239/PJ/2026, which took effect on October 8 2026. The policy provides administrative penalty relief for various categories, including:
Late submission of tax returns;
Voluntary amendments to tax returns;
Late tax payments; and
Administrative sanctions imposed under SKP and STP.
The reduction rates are 100%, 90%, 75%, 50%, and 25%, depending on the type of administrative sanction, the payment status of the principal tax liability, and the payment or tax return submission period.
To qualify for the relief, taxpayers must satisfy the applicable requirements, including:
The settlement of principal tax liabilities or tax debts, as applicable to the relevant category;
Submission of a statement confirming that the administrative sanctions arose due to an oversight or were not attributable to the taxpayer’s fault; and
Compliance with the applicable requirements concerning lawsuits and other legal remedies.
Applications under KEP-239/PJ/2026 must be submitted no later than October 1 2028, while the payment or filing periods for most relief schemes end on June 30 2027.
Clarification of requirements for the reduction or cancellation of incorrect tax assessments
PMK 71/2026 also clarifies the requirements for submitting applications to reduce or cancel incorrect tax assessments, including a tax due notification letter (surat pemberitahuan pajak terutang) and an SKP PBB.
The amended provisions further clarify the relationship between such applications, the status of objection submissions, and applications for PBB tax reduction under Article 19 of the Land and Building Tax Law.
