The Government Bears 100% VAT on Domestic Economy Class Flight Tickets and Enhances Tax Reporting Requirements under Regulation of the Minister of Finance Number 24 of 2026

Introduction

On April 21, 2026, the Minister of Finance issued Regulation of the Minister of Finance Number 24 of 2026 on Value Added Tax on the Delivery of Domestic Economy Class Scheduled Commercial Air Transport Services in Support of Government Policies Addressing the Increase in Aviation Fuel Prices for the 2026 Fiscal Year (“MOF Regulation 24/2026”). MOF Regulation 24/2026 regulates aviation tax incentives for the 2026 fiscal year, wherein the government bears the Value Added Tax (Pajak Pertambahan Nilai, “VAT”) on domestic economy class air transport tickets. The government issued MOF Regulation 24/2026 to maintain public purchasing power in response to the increase in aviation fuel prices.

Key Provisions

Operational Definitions, Subjects, and Objects of the Facility

Article 1 of MOF Regulation 24/2026 sets forth the definitions related to the subjects and objects in the provision of this facility. Air Transport Businesses encompass State-Owned Enterprises, Regionally Owned Enterprises, or Indonesian legal entities in the form of limited liability companies or cooperatives, whose main activity is the operation of aircraft to transport passengers, cargo, and/or mail for compensation. The facility applies to Domestic Economy Class Scheduled Commercial Air Transport services, namely the transportation of passengers from one airport to another within the territory of Indonesia in economy class. Tickets, airway bills, or delivery bills issued for the provision of domestic air transport services are treated as equivalent to Tax Invoices.

Incentive Amount and Related Components

Article 2 paragraphs (1) and (3) stipulate that the VAT payable on the delivery of domestic economy class air transport services is borne by the government at 100% (one hundred percent) for the 2026 fiscal year. This Government-Borne Value Added Tax (Pajak Pertambahan Nilai Ditanggung Pemerintah, “Government-Borne VAT”) facility does not cover all components of the ticket price. Article 2 paragraph (4) regulates that the Government-Borne VAT is calculated from the base fare and fuel surcharge. Other components such as the Mandatory Contribution to Jasa Raharja (Iuran Wajib Jasa Raharja, “IWJR”) and passenger service charge (“PSC”) are not included in the tax imposition base eligible for the Government-Borne VAT facility.

60-Day Period Requirement

The Government-Borne VAT facility only applies if the ticket purchase and flight execution are conducted within a period of 60 (sixty) days from the effective date of MOF Regulation 24/2026, as set forth in Article 3 paragraph (1). The example in the Annex indicates that the VAT is borne by the government if both the ticket purchase date and flight date fall within the aforementioned period. If either is conducted outside the period, the VAT is not borne by the government.

VAT Calculation Mechanism

The calculation of payable VAT follows the provisions of Regulation of the Minister of Finance Number 131 of 2024 on Value Added Tax Treatment on the Import of Taxable Goods, Delivery of Taxable Goods, Delivery of Taxable Services, Utilization of Intangible Taxable Goods from Outside the Customs Area within the Customs Area, and Utilization of Taxable Services from Outside the Customs Area within the Customs Area as set forth in Article 2 paragraph (2). Based on the guidelines in the Annex, the VAT is calculated at a rate of 12% (twelve percent) on the Tax Imposition Base (Dasar Pengenaan Pajak, “DPP”) in the form of other values. Such other value amounts to 11/12 (eleven-twelfths) of the base fare and fuel surcharge. Therefore, the payable VAT is calculated by applying the 12% rate to 11/12 of the total base fare and fuel surcharge.

Exclusion of Additional Services Outside the Ticket

Annex Part C indicates that the Government-Borne VAT facility does not cover additional services. If passengers purchase extra baggage or opt for seat selection, the VAT on such services remains collected from the passengers. Airlines calculate the VAT on additional services at 11/111 of the invoice value that includes VAT, in accordance with the example in the Annex.

Obligation to Issue Invoices and Report Periodic Tax Returns

Air Transport Businesses as Taxable Entrepreneurs (Pengusaha Kena Pajak) remain obligated to issue Tax Invoices or equivalent documents, such as tickets, and submit Periodic VAT Returns (Surat Pemberitahuan Masa PPN) as set forth in Article 4 paragraph (1). Article 4 paragraph (2) distinguishes the reporting treatment based on the fulfillment of requirements. If the transaction does not meet the 60-day period provision, the airline issues a Tax Invoice with normal VAT calculation and reports it in the section for deliveries for which VAT must be self-collected on a consolidated basis in the Periodic VAT Return. If the transaction meets the requirements, the airline includes the Government-Borne VAT in the Tax Invoice and reports it in the section for deliveries eligible for the VAT facility on a consolidated basis in the Periodic VAT Return.

Obligation to Report Electronic Transaction Details

Article 5 obligates airlines to compile a detailed list of Government-Borne VAT transactions. This list includes, among others:

1. The airline name and Taxpayer Identification Number (Nomor Pokok Wajib Pajak, “NPWP”);

2. Month of ticket issuance;

3. Booking reference;

4. Departure and arrival airports;

5. Dates of purchase and flight;

6. DPP value;

7. Amount of payable VAT; and

8. Government-Borne VAT.

Airlines submit the list electronically through the Directorate General of Taxes website, within the same Tax Period as the submission of the Periodic VAT Return, and no later than July 31, 2026.

Official Format for Electronic Reporting

The Annex sets forth the format for compiling the detailed transaction list as referred to in Article 5. The identity section includes the name of the Taxable Entrepreneur, NPWP, and month of ticket issuance. The list is compiled in a table format according to the format determined in the Annex. The completion of the table follows the provisions below:

1. The DPP column is filled with the total base fare and fuel surcharge;

2. The payable VAT column is filled based on the tax calculation results; and

3. The Government-Borne VAT column is filled with an amount equal to the payable VAT.

Implementation of Subsidy

Article 7 regulates that the implementation and accountability of the subsidy for the Government-Borne VAT facility follow the general provisions concerning government-borne taxes.

Effective Date and Sanctions for Facility Cancellation

In accordance with Article 8, MOF Regulation 24/2026 took effect on April 25, 2026, which is 1 (one) day after its date of promulgation on April 24, 2026. The provisions on the cancellation of the facility are set forth in Article 6 paragraph (1), wherein the 100% VAT incentive is not borne by the government if the airline meets one of the following conditions:

1. The services are delivered outside the 60-day period;

2. Passengers are served in a class other than economy; or

3. The airline fails to submit the electronic detailed transaction list in accordance with the July 31, 2026 deadline.

Based on Article 6 paragraph (2), in the event the facility is not provided, the delivery of the services in question is subject to VAT in accordance with the provisions of laws and regulations in the taxation sector.

Closing

MOF Regulation 24/2026 stipulates the provision of a government-borne Value Added Tax incentive at 100% on the delivery of domestic economy class scheduled commercial air transport services for the 2026 fiscal year in response to the increase in aviation fuel prices and to support the maintenance of public purchasing power. The facility is strictly limited to covering only the base fare and fuel surcharge components, and applies on the condition that the ticket purchase and flight execution are conducted within a period of 60 days from the effective date of MOF Regulation 24/2026. In its implementation, air transport businesses remain obligated to issue tax invoices or equivalent documents and to calculate and report VAT in the Periodic VAT Return. They must also submit detailed transaction lists electronically through the Directorate General of Taxes system within the same Tax Period as the submission of the Periodic VAT Return and no later than July 31, 2026. If the period requirements are not met, passengers are served in a class other than economy, or reporting obligations are not fulfilled on time, the VAT is not borne by the government; therefore, the delivery of services is subject to VAT in accordance with the provisions of laws and regulations in the taxation sector. Furthermore, additional services outside the ticket components, such as extra baggage and seat selection, are not included in the scope of the incentive and remain subject to VAT collected from passengers.