Special Economic Zones in Indonesia: What Investors Get
What special economic zones in Indonesia give an investor: a corporate income tax reduction of up to 100%, customs and VAT facilities, and who qualifies.
References (6)
- UU 39/2009 on special economic zones, as amended by the Job Creation Law, UU 6/2023. Article 1(1) defines a zone. Article 1(5) defines the Administrator.
- PP 40/2021, in force 2 February 2021, governs how the zones are run and the facilities they carry. Article 72 is the main activity. Articles 46 to 49 set the time a zone has to become operational. Articles 73(4), 75, 76, 78, 79 and 81 cover eligibility and income tax. Articles 83 and 84 cover VAT, Articles 74, 91 and 95 customs, and Article 100 regional taxes. Article 105 covers the foreign manpower plan, Articles 138 and 141 land, and Articles 146 to 148 licensing.
- PMK 237/PMK.010/2020, in force 29 January 2021, as amended by PMK 33/PMK.010/2021 in force 1 April 2021, sets the tax and customs detail. Article 2(4) is who qualifies. Articles 5 and 6 are the reduction, its minimum and its periods. Articles 7 and 8 are the second package and the conditions. Articles 9, 11 and 12 are the application, the decision and when the reduction starts.
- PMK 130/PMK.010/2020, as replaced by PMK 69/2024. Article 3(1)(c) bars the tax holiday for an investment that already holds a zone income tax facility.
- PP 2/2022 revoked the designation of one zone that could not become operational within the period set.
- The national council for special economic zones, distribution map at kek.go.id, viewed 28 September 2026.
Special economic zones in Indonesia are areas with set boundaries that the state designates to carry out economic activity and to receive facilities of their own (the law on special economic zones, UU 39/2009, Article 1(1), as amended by the Job Creation Law, UU 6/2023). For an investor, the main draw is a reduction of corporate income tax of up to 100%, with VAT, customs and licensing facilities handled inside the zone.
There are around 25 special economic zones, known in Indonesian as KEK (Kawasan Ekonomi Khusus), listed by the national council for the zones on its distribution map at kek.go.id (viewed 28 September 2026). The list changes from time to time.
How special economic zones work: the main activity decides the benefit
Each zone has an Administrator, the unit that runs business licensing, permits and supervision for the businesses inside it (UU 39/2009, Article 1(5)). The national council sets one or more activities as the zone’s main activity, and anything else a business does there is an “other activity” (Government Regulation PP 40/2021, Article 72). That split matters more than any other detail, because it decides which income tax facility a company can have.
A new zone has a set period to become ready to operate, with limited extensions, and one that does not open in time can lose its status (Articles 46 to 49); one zone did, in 2022 (Government Regulation PP 2/2022). So the zone itself is worth checking on the official map before a site is chosen.
The corporate income tax reduction
A company that invests in the zone’s main activity may have the corporate income tax on the income from that activity reduced (PP 40/2021, Article 75(1)). The detail is in a Minister of Finance regulation, PMK 237/PMK.010/2020 as amended by PMK 33/PMK.010/2021. The reduction is 100% of the tax due, for an investment of at least IDR 100 billion (Article 5(1) and (2)), and the larger the planned investment, the longer it lasts.
- IDR 100bn to under 500bn 10years
- IDR 500bn to under 1tn 15years
- IDR 1tn and above 20years
When that period ends, two further tax years follow at a 50% reduction (Article 6(3)). The reduction covers the main activity only: income the company earns from anything else is taxed in the ordinary way (PP 40/2021, Article 76).
PMK 81/2024, in force from 1 January 2025, did not replace the zone rules. The list of regulations it revoked, in its Article 483, does not include PMK 237/2020.
The second package, and choosing between them
A company that does not qualify for the full reduction still has a facility. The second package is open to an investment in an “other activity”, to a main-activity investment under IDR 100 billion, and to a main-activity investor who prefers it. It has no minimum investment (PMK 237/2020, Article 8(4)(a)).
| Full reduction | Second package | |
|---|---|---|
| Available to | An investment of at least IDR 100 billion in the zone’s main activity | An investment in an “other activity”, a main-activity investment under IDR 100 billion, or a main-activity investor who chooses it |
| Minimum investment | IDR 100 billion (PMK 237/2020, Article 5(2)) | None (PMK 237/2020, Article 8(4)(a)) |
| What it gives | 100% of the corporate income tax due on the main activity (Article 5(1)) | A net income reduction of up to 30% of the investment, at 5% a year for six years. Accelerated depreciation. 10% tax on dividends to a non-resident shareholder, or a lower treaty rate. Losses carried forward for 10 years (PP 40/2021, Article 78(1); PMK 237/2020, Article 7) |
| How long | 10 to 20 tax years, then two more at 50% (Article 6(2) and (3)) | Six years for the net income reduction, and 10 years for losses |
One investment, one facility
An investment takes one of these facilities, not several. Inside a zone, the full reduction and the second package are alternatives (PP 40/2021, Article 79). An investment that already holds a tax holiday or a tax allowance cannot take either of them (PMK 237/2020, Article 8(2)(c) and 8(4)(c)), and one that holds a zone facility cannot then take the tax holiday (PMK 130/2020, Article 3(1)(c), as replaced by PMK 69/2024). No deadline has been set for applying for the zone facility, which is one way it differs from the national schemes in our overview of Indonesia’s tax incentives.
What else a zone company receives
The income tax facility is the headline, but a company operating in a zone also receives these (PP 40/2021).
VAT
VAT is not collected on qualifying goods brought into the zone, on qualifying imports, or on supplies between zone businesses. Sales into the rest of Indonesia bear VAT in the normal way (Articles 83 and 84).
Customs
Import duty is suspended or exempted and import taxes are not collected on goods from abroad (Article 91). Goods sold into Indonesia with at least 40% local content pay 0% duty (Article 95(7)). Suspension needs an IT inventory system linked to Customs (Article 74).
Regional taxes
Each region must reduce its taxes for the zone, including a 50% to 100% reduction of land and building acquisition duty (BPHTB) and land and building tax (PBB). The rate is set by each region (Article 100).
Licensing
The Administrator issues every business licence through OSS (Online Single Submission), under the same risk-based system used everywhere else (Articles 146 to 148). Read how OSS and KBLI decide a licence.
Land
Land comes through the zone developer, which provides the rights a tenant needs, such as a right to build (HGB) or a right of use (hak pakai), with special procedures (Articles 138 and 141(2)).
People
The foreign manpower plan (RPTKA) for a foreign director or commissioner is approved once, for as long as they hold the post (Article 105(2)). Zones also have their own immigration services and visa codes for people working there.
Who qualifies
The facilities go to a company that does business in the zone. For the tax, customs and excise facilities, the company must be:
- an Indonesian corporate taxpayer, through its head office or a branch, carrying on business in the zone (PP 40/2021, Article 73(4); PMK 237/2020, Article 2(4));
- holding a business licence (PP 40/2021, Article 73(4)).
For the full reduction, it must also be an Indonesian legal entity (PMK 237/2020, Article 8(2)(b)). For a foreign investor, that means a PT PMA, a foreign-owned limited company.
The step that decides most cases comes before any of this: checking whether the company’s business activity is a main activity of the zone it is looking at. Where it is, the full reduction is within reach from IDR 100 billion. Where it is not, the second package still applies. In special economic zones in DKI Jakarta, West Java, Banten, Central Java, Yogyakarta or East Java, the investor also commits to realising the planned investment within five years of the decision (Article 8(3)).
Setting up in a zone, step by step
The order follows the national council’s own guide for tenants on kek.go.id, with the tax application added where the regulation places it.
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The site
Agree the land or space with the company that develops the zone.
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The company
Establish the PT PMA that will operate there.
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The licences
The company receives its NIB, the business identification number, through OSS, and the Administrator issues its business licences (PP 40/2021, Articles 146 to 148).
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The application
Apply through OSS with the NIB, or within a year of the licence (PMK 237/2020, Article 9(7) and (8)).
-
The decision
The reduction then runs from the year commercial production begins (PMK 237/2020, Articles 11(4) and 12(1)).
The facility has to be applied for before commercial production begins, so it belongs with the set-up work rather than after it.
Questions people ask
Does the company have to be based in the zone?
Can a zone company also use the 0.5% final tax on turnover?
Are foreign specialists taxed differently in a zone?
What this means for you
Start with the activity, not the incentive. Once it is clear whether the business is a main activity of the zone, the choice between the full reduction and the second package largely makes itself, and the application sits in the set-up sequence, before commercial production.
We have worked with clients in special economic zones. Our part is the company and its tax affairs, through our corporate tax and compliance work.