Government offers tax breaks as stricter export proceeds rules take effect

The government has introduced tax incentives for exporters that retain foreign exchange earnings from natural resource exports in the domestic financial system, as stricter rules requiring the repatriation of export proceeds took effect on Monday.

Finance Minister Purbaya Yudhi Sadewa said the government would exempt compliant exporters from income tax on earnings generated from designated export-proceeds placement instruments, with the level of incentives linked to how long funds are retained in Indonesia.

"The government is providing tax incentives for exporters that comply with the requirement to place natural resource export proceeds within Indonesia. The income tax rate can reach 0%," Purbaya told a press conference in Jakarta on Sunday.

The measures are part of Government Regulation No. 21 of 2026, which aims to strengthen Indonesia's external position by increasing the retention of foreign exchange earnings from exports of natural resources.

Under the new rules, exporters of natural resources are required to repatriate 100% of their export proceeds to Indonesia, Purbaya said.

Non-oil and gas exporters must place all of their export earnings in special domestic accounts for at least 12 months, while oil and gas exporters are required to place at least 30% of their export proceeds in Indonesia for a minimum of three months.

The funds must be deposited through state-owned banks, and exporters are allowed to convert a maximum of 50% of the foreign-currency proceeds into rupiah.

The government said the policy is intended to boost foreign-exchange liquidity in the domestic banking system, support exchange-rate stability and help finance national development.

Indonesia has provided exemptions for some exporters, particularly in the mining sector, whose transactions are governed by bilateral agreements or other trade arrangements between Indonesia and partner countries.

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Under those provisions, eligible exporters may place at least 30% of their export proceeds for three months and use banks outside the state-owned banking system for foreign-exchange transactions.

Purbaya said the tax incentives were designed to balance the stricter regulatory requirements with benefits for exporters.

He said income from export-proceeds placement instruments could qualify for a zero-percent income tax rate depending on the duration of fund placement, compared with tax rates of up to 20% on conventional investment instruments.

The government hopes the policy will increase foreign-exchange reserves held domestically, strengthen Indonesia's external resilience and support economic stability amid global economic uncertainty.

Editing by Reiner Simanjuntak