Zero Percent Import Duty Incentives and Tax Penalty Waivers: How the Government Strengthens Downstream Industry Competitiveness

The Ministry of Finance has issued Minister of Finance Regulation (PMK) Number 71 of 2026 as an amendment to PMK Number 118 of 2024 concerning the procedures for correction, objection, reduction, elimination, and cancellation in the taxation sector. Through the provisions of Article 27A, the government grants authority to the Director General of Taxes to reduce or eliminate administrative sanctions, as well as reduce Land and Building Tax (PBB) administrative fines on tax documents that meet the requirements. This policy applies to applications submitted no later than two years from the date the PMK takes effect.

These provisions were subsequently followed up through the Decree of the Director General of Taxes Number KEP-239/PJ/2026, stipulated on October 8, 2026. This decree covers seven categories of administrative sanctions, including sanctions resulting from late submission of tax returns (SPT), voluntary SPT corrections, late tax payments, as well as sanctions within tax assessment letters (SKP) and tax collection letters (STP), including those related to PBB. The facility also covers administrative sanctions on audit results related to assets that were undisclosed or under-disclosed during the Voluntary Disclosure Program (PPS). Taxpayers must meet the applicable requirements and submit their applications by October 1, 2028, at the latest.

The magnitude of the administrative sanction reduction is a primary focus in the implementation of this policy. For the category of late submission of Annual Income Tax Returns up to Tax Year 2025 and/or Periodic Tax Returns up to the September 2026 Tax Period with an underpayment status, a 100% reduction can be granted if the SPT is submitted between October 8 and December 31, 2026. If the SPT is submitted between January 1 and March 31, 2027, a 50% reduction is granted, while submissions between April 1 and June 30, 2027, can receive a 25% reduction. A similar scheme applies to voluntary SPT corrections and late tax payments or deposits, subject to established requirements.

To obtain the reduction or elimination of sanctions, taxpayers must submit an application to the Director General of Taxes no later than October 1, 2028. The established requirements include provisions regarding lawsuits or other legal remedies, mandating the withdrawal of any legal remedies that have already been filed. Taxpayers must also submit a statement declaring that the administrative sanctions arose due to an oversight (unintentional error) and not due to deliberate fault. Relief is only granted for administrative sanctions that remain unpaid or unsettled, while the reduction amounts for other categories depend on the type of sanction, timing of payment, and fulfillment of applicable requirements.

In addition to providing relief in the taxation sector, the government has established fiscal incentives to support the competitiveness of the downstream plastic industry. Through PMK Number 68 of 2026 concerning the Fourth Amendment to PMK Number 26/PMK.010/2022, the government lowered the import duty tariff on plastic raw materials to 0% for six specific tariff lines (HS codes). The regulation was stipulated on September 28, 2026, and based on related reports, took effect on October 7, 2026. This facility is granted for six months from the regulation's effective date.

The six tariff lines receiving the facility include 3901.10.12, 3901.10.19, 3901.10.99, 3902.10.30, 3902.10.90, and 3902.30.30. This tariff reduction is aimed at increasing the competitiveness of the domestic downstream plastic industry by supporting the import of certain raw materials. Consequently, industry players need to ensure the conformity of the tariff lines for their imported goods and observe the facility's validity period to utilize the policy in accordance with regulations.

The dual policies of reducing administrative tax sanctions and lowering import duties on plastic raw materials provide taxpayers and industry players with opportunities to manage their obligations and business costs more efficiently. For taxpayers, the sanction reduction facility can be utilized to settle outstanding tax obligations in accordance with the requirements. Meanwhile, for the downstream plastic industry, the 0% import duty tariff has the potential to alleviate the import duty burden on raw materials falling under the six designated tariff lines.

The government is offering taxpayers a window to apply for sanction relief while simultaneously providing targeted fiscal incentives for the downstream plastic industry. Taxpayers are advised to review any open administrative sanctions, pay close attention to deadlines, and ensure the completeness of their application requirements. On the other hand, industry players need to verify the classification of their imported goods and plan their procurement strategically while the facility remains in effect. Proper utilization of these two policies can assist business actors in fulfilling their tax obligations while optimizing business costs under the available regulatory frameworks.