The Indonesian government has officially extended its income tax relief program for workers in designated labor-intensive industries throughout the 2026 fiscal year. The move is part of a broader fiscal stimulus package aimed at protecting household purchasing power and maintaining social stability amid a challenging global economic landscape.

The extension is formalized under Minister of Finance Regulation (PMK) No. 105/2025. Under this policy, the government will continue to employ the “Government-Borne Income Tax” (PPh 21 DTP) scheme, effectively paying the income tax of eligible employees on their behalf to increase their monthly take-home pay.

Key Details of the 2026 Tax Relief

  • Mechanism: The government uses a “Government-Borne Income Tax” (PPh 21 DTP) scheme, meaning the state pays the employee’s income tax on their behalf. This effectively increases the “take-home pay” for eligible workers.
  • Legal Basis: The extension is stipulated in Minister of Finance Regulation (PMK) No. 105/2025, which was enacted in late December 2025 to take effect for the 2026 period.
  • Target Sectors: The relief is specifically directed at five labor-intensive business sectors:
    1. Textiles and apparel
    2. Footwear
    3. Furniture
    4. Leather and leather goods
    5. Tourism (added to the list more recently)

Eligibility Criteria for Workers

To qualify for the tax exemption, employees must meet the following requirements:

  • Income Cap: Gross monthly income must not exceed Rp 10 million (approximately US$600).
  • Status: The incentive applies to both permanent and non-permanent (temporary) employees.
  • Documentation: Workers must have a registered Tax Identification Number (NPWP) or a National Identity Number (NIK) that is integrated with the tax administration system.
  • Exclusions: The worker must not be receiving similar tax incentives under other government schemes.

Objectives

By extending this relief, the government aims to:

  • Boost Consumption: Directly increase the disposable income of low-to-middle-income earners, which is expected to flow back into the economy through consumption.
  • Support Industry Stability: Provide a “cushion” for labor-intensive industries that are particularly vulnerable to external economic shocks and rising living costs.
  • Social Protection: Use fiscal policy as a tool for social and economic stabilization in the 2026 fiscal year.

This extension is part of a broader 2026 economic stimulus package that also includes other measures like the extension of final income tax relief for MSMEs (at a 0.5% rate) until 2029.

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