With a highly positive tone, this regulation serves as a solution to the business community's need for flexibility in conducting reorganizations without being burdened by unnecessary tax costs, provided the business objectives are clear and not intended for tax avoidance.
One of the most fundamental breakthroughs in PMK 1 of 2026 is the redefinition of the concept of State-Owned Enterprises (BUMN). Previously, BUMN status was heavily dependent on majority capital ownership by the state. However, under this latest regulation, the definition of an SOE has been significantly expanded. An SOE now includes not only entities where all or the majority of capital is state-owned but also business entities in which the Republic of Indonesia holds "special rights."
This change is crucial in the era of SOE modernization. It accommodates holding and sub-holding structures where the state may no longer directly hold majority shares at the subsidiary level but maintains strategic control through "dwiwarna" (golden) shares or other special rights. With this new definition, tax facilities can still be enjoyed by these transforming entities, ensuring that national strategic agendas are not hindered by rigid technical definitions.
At the heart of business reorganization incentives is the permission to use Book Value (instead of market price) in the transfer of assets. Using market value often triggers Income Tax (PPh) on capital gains that have not actually been realized in cash, which can weigh heavily on the cash flow of companies undergoing mergers or acquisitions.
PMK 1 of 2026 significantly expands the scope of using book value to support SOE restructuring. Now, the use of book value is permitted for business takeovers (acquisitions) between domestic corporate taxpayers, provided they are conducted in connection with SOE restructuring. The criteria have also been clarified: a transfer of share ownership exceeding 50% or the ability to determine the management and policies of the company.
More interestingly, this facility is accommodative of ongoing processes. The rule covers restructurings carried out as far back as the beginning of the 2021 Tax Year. This provides legal certainty and tangible government support for the SOE "holding-ization" process that has taken place over the past few years, ensuring that past corporate actions meeting the criteria remain protected by fiscal facilities.
While many provisions focus on SOEs, PMK 1 of 2026 brings welcome news for all corporate taxpayers, including the private sector. The most anticipated change is the relaxation of the Business Purpose Test (BPT) requirements.
Under the previous regulation (PMK 81 of 2024), taxpayers performing mergers or acquisitions using book value were required to continue business activities (for both the transferor and the transferee) for a minimum of 5 (five) years. PMK 1 of 2026 reduces this duration to 4 (four) years following the effective date of the corporate action.
This reduction in the operational "lock-up" period provides greater flexibility for companies to adapt to rapid market changes. In a dynamic business world, the obligation to maintain the status quo for five years can become a burden; shortening it to four years shows that regulators understand the need for agility in post-merger business strategies.
Often, corporate groups need to perform gradual or sequential restructurings to achieve an ideal organizational form. PMK 1 of 2026 provides firm legal protection through a "grandfathering" or penalty exemption mechanism.
Article 405, paragraph (4) stipulates that if a taxpayer has previously received approval for book value and has met the BPT (business continuity) requirements for 4 years, and subsequently undergoes further restructuring (such as another merger or consolidation) after the enactment of this PMK, they are exempt from the provision of recalculating using market value. This eliminates concerns that subsequent restructurings would invalidate the tax facilities received in previous ones, providing much-needed legal certainty for long-term corporate strategies.
Overall, PMK 1 of 2026 is more than just a technical tax rule. It is an economic policy instrument designed to facilitate efficiency. By recognizing the state's "special rights," expanding book value facilities for acquisitions within the framework of holding formation, and relaxing the Business Purpose Test timeline for the general public, the government is creating a solid foundation for SOEs to become larger and stronger, and for the private sector to become more agile.
This regulation sends a positive signal that Indonesia's tax system, through Coretax, is ready to support substantial business growth, prioritizing economic synergy over mere short-term tax revenue from "paper transactions." For CEOs and CFOs, now is the opportune time to review corporate group structures and leverage this regulatory momentum for optimal efficiency.
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