Indonesia – Updated Tax Appeal and Administrative Relief Rule
Indonesian Minister of Finance through its Regulation No 71 of 2026 (“MOFR 71/2026”) has updated the procedures for Correction, Objection, Reduction, Waiver, and Cancellation in the Taxation.
Scope of Administrative Relief under MOFR 71/2026. Under the existing provisions, the Directorate General of Taxes (DGT), either ex officio or upon application by a taxpayer, may reduce or waive administrative sanctions or fines, where such sanctions were imposed due to the taxpayer’s inadvertence or through no fault of the taxpayer, including administrative sanctions and fines relating to Land and Building Tax (“L&B Tax”) under certain circumstances. Such sanctions include sanctions or fines in the form of interest, penalties, and surcharges payable under the applicable tax laws and regulations.
To support national economic growth, the 2026 Minister of Finance Regulation introduces new Articles 21A and 27A under MOFR 71/2026, which provide that the DGT may reduce or waive administrative sanctions or reduce administrative fines relating to L&B Tax in respect of the following:
- Notice of Tax Assessment;
- Notice of Tax Assessment regarding L&B Tax;
- Notice of Tax Collection, or
- Notice of Tax Collection regarding L&B Tax;
which has met the requirements set out under the prevailing regulations.
Payment as a Prerequisite for Application. In submitting an application for the reduction or waiver of administrative sanctions, including the reduction of administrative fines relating to L&B Tax (the “Application”), a taxpayer must satisfy the following requirements:
- Applications concerning Tax Assessment Letters or Land and Building Tax Assessment Letters may only be submitted if the requirements set out in Article 23(2) MOFR 118/2024 are met; and
- Applications concerning Tax Collection Letters or Land and Building Tax Collection Letters may only be submitted if the requirements set out in Article 23(3) MOFR 118/2024 are met.
Such requirements is waived where the relevant tax object is affected by a natural disaster, a non-natural disaster, or a social disaster.
In addition, as previously stipulated in Article 23(5), one of the requirements for submitting an Application is that the taxpayer must have paid the unpaid or underpaid tax, the principal amount or difference in the principal amount of Land and Building Tax, or the unpaid or underpaid Land and Building Tax (the “Outstanding Tax”).
Previously, where payment was made before the month in which the Application was submitted, the taxpayer was required to pay the Outstanding Tax together with the applicable administrative sanctions or administrative fines relating to Land and Building Tax (the “Administrative Tax Penalties”). However, where payment was made in the same month as the submission of the Application, the taxpayer was only required to pay the Outstanding Tax.
However, MOFR 71/2026 introduces a technical change in this regard. The Regulation no longer distinguishes between payments made in the month of submission of the Application and those made in prior months. Accordingly, the payment requirement is limited to the Outstanding Tax. Any payment exceeding the Outstanding Tax, however, will be applied toward the Administrative Tax Penalties. Additionally, in submitting the application, the Taxpayer should refer to Appendix C under MOFR 71/2026, regarding sample document formats and calculations for reductions, write-offs, and cancellations, as Appendix C has been amended.
The DGT is required to conduct a preliminary review of the Application to verify compliance with, inter alia, the aforementioned requirements and determine whether the Application may be considered. If the requirements are not met, the DGT will issue a letter returning the Application to the taxpayer.
Transition Arrangement. The DGT may reduce or waive administrative sanctions, or reduce administrative fines relating to Land and Building Tax (PBB), for Applications submitted within two (2) years from the effective date of 2 October 2026.
However, where an Application for the reduction or waiver of administrative sanctions was received by the DGT before the effective date of this Regulation, the provisions of the previous regulation shall continue to apply to such Application.
Conclusion. MOFR 71/2026 introduces changes to the procedures for reducing or waiving administrative sanctions and fines. However, Taxpayers should take note of the revised Application requirements and the amendments to Appendix C, which may affect the relevant calculation mechanisms. Given the potential benefits of these provisions, taxpayers should assess their eligibility and consider utilizing the available relief, while ensuring compliance with the applicable requirements transition arrangement.
Disclaimer: This report is solely for general information only and never constitutes as legal or tax advice. The user shall further consult with any qualified advisor before referring to any or entire part of this report. Any available copyrights are reserved.
For further information, please contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
