Minister of Finance Regulation Number 26 of 2026 Regulates the Allocation and Payment of Cigarette Tax

Introduction

On 22 April 2026, the Ministry of Finance issued Minister of Finance Regulation Number 26 of 2026 on Procedures for the Collection, Withholding, and Remittance of Cigarette Tax (“MOF Regulation 26/2026”), which took effect on 12 May 2026. This regulation aims to provide comprehensive guidelines for the central and regional governments in implementing the collection, withholding, and remittance of Cigarette Tax.

MOF Regulation 26/2026 implements the mandate of Article 34 paragraph (5) of Law Number 1 of 2022 on Financial Relations between the Central Government and Regional Governments, as well as Article 100 paragraph (3) of Presidential Regulation Number 82 of 2018 on Health Insurance. MOF Regulation 26/2026 strengthens the discipline of regional governments in remitting Cigarette Tax contributions, ensures the smooth financing of the Health Insurance program, and optimizes law enforcement in the excise sector.

 

Comparison

MOF Regulation 26/2026 revokes and replaces Minister of Finance Regulation Number 143 of 2023 on Procedures for the Collection and Remittance of Cigarette Tax (“MOF Regulation 143/2023”). The following is a comparison table between MOF Regulation 26/2026 and MOF Regulation 143/2023:

 

Key Provisions

Cigarette Tax Objects, Rates, and Distribution

Pursuant to Article 2 paragraphs (1) and (6), the basis for the imposition of Cigarette Tax is the excise imposed by the Government on cigarettes, at a rate of 10% of Cigarette Excise. Article 2 paragraphs (2) - (5) further specify that Cigarette Tax objects include cigarettes, cigars, leaf cigarettes, and other tobacco products subject to Cigarette Excise, including electronic cigarettes, while sliced tobacco, molasses tobacco, snuff tobacco, and chewing tobacco are expressly excluded. The amount of Cigarette Tax payable is calculated by multiplying the tax base by the applicable rate.

Article 2 paragraph (8) divides Cigarette Tax revenue into two portions: (a) the portion that may be used by the Government for law enforcement in the customs and excise sector, the amount of which refers to the State Budget Law for each fiscal year (Article 3); and (b) the portion allocated to Regional Governments, the utilization of which is further regulated under Article 4. The collection of Cigarette Tax is carried out by the Customs and Excise Office simultaneously with the collection of Cigarette Excise, based on the technical guidelines set out in letter A of the Annex to MOF Regulation 26/2026.

Allocation of the Regional Government Portion of Cigarette Tax

Article 4 paragraph (1) requires Regional Governments to allocate their share of Cigarette Tax revenue, both at the provincial and regency/municipality levels, with at least 50% allocated to activities with designated uses (earmarked), while the remaining amount may be allocated to activities without designated uses (non-earmarked).

Article 4 paragraphs (3) and (4) regulate that the earmarked portion shall be used for two purposes, namely contributions supporting the Health Insurance program and other health services, as well as law enforcement by Regional Governments, with the following percentage allocation:

1. 37.5% of the total Cigarette Tax revenue allocated to each region (equivalent to 75% of the 50%) for contributions supporting the Health Insurance program; 
2. A minimum of 7.5% for other health services; and 
3. A maximum of 5% for law enforcement by Regional Governments. 

It is important to note that pursuant to Article 4 paragraph (6), the detailed earmarked allocation provisions above will only begin to apply to the planning of the Regional Revenue and Expenditure Budget for Fiscal Year 2027. Any remaining earmarked Cigarette Tax allocation that is not utilized by the end of the fiscal year must still be used for public health services and/or law enforcement in the following fiscal year (Article 40 paragraph (6)).

Procedures for Cigarette Tax Payment by Cigarette Taxpayers

Article 5 stipulates that Cigarette Tax constitutes a regional tax administered under a self-assessment system. Cigarette Taxpayers, namely cigarette manufacturers/producers and cigarette importers holding a taxable goods entrepreneur identification number, are required to state their tax calculation in the Cigarette Tax Notification Letter (“SPPR”), which must be submitted to the Head of the Customs and Excise Office simultaneously with the submission of the CK-1 document (Request for Tobacco Excise Stamp Ordering) through the application system in the excise sector. If the system experiences disruption, the SPPR may be submitted in written form in accordance with the format provided in letter B of the Annex to MOF Regulation 26/2026.

Article 6 provides that Customs and Excise Officials are required to examine the submitted SPPR, including: (a) the completeness and accuracy of the SPPR; (b) the conformity between the SPPR and the CK-1 document; and (c) the correctness of the Cigarette Tax calculation. If the SPPR is declared complete, compliant, and accurate, Customs and Excise Officials shall assign a registration number and registration date. Conversely, if the SPPR does not meet the requirements, Customs and Excise Officials shall issue a rejection note (format under letter C of the Annex), and the Taxpayer may resubmit the SPPR after making corrections.

Article 7 stipulates that Cigarette Taxpayers who have obtained a registration number and registration date are required to pay Cigarette Tax to the State General Treasury Account (RKUN) in cash through a Collecting Agent using a billing code issued by the Directorate General of Customs and Excise through the biller portal. If the Taxpayer obtains a deferral of Cigarette Excise payment, the Cigarette Tax payment shall receive the same deferral. The Collecting Agent subsequently issues a State Revenue Receipt (BPN) as proof of payment. If the Cigarette Tax has not been fully paid, applications for excise stamp provision for the subsequent period will not be processed (Article 8 paragraph (4)).

Revenue Recapitulation and Collection of Underpayments

Pursuant to Article 9 paragraphs (1) - (5), the technical directorate within the Directorate General of Customs and Excise conducts a monthly recapitulation of Cigarette Tax revenue based on data from the previous month, which is set out in a Cigarette Tax revenue realization report. The report must be submitted to the Directorate General of Fiscal Balance through the Directorate of Regional Taxes and Regional Levies no later than 10 working days in the following month, in the form of a software data archive stored on digital storage media.

Article 10 regulates the mechanism for collecting underpayments. If a Cigarette Tax underpayment is identified, which may arise from calculation errors in CK-1 documents, reclassification of tobacco manufacturers, classification of retail selling prices per stick or gram, and/or other errors in accordance with excise regulations, the Head of the Customs and Excise Office shall issue and deliver a notice of underpayment to the Cigarette Taxpayer within a maximum period of 1 working day from issuance. The notice serves as a regional tax collection letter constituting the basis for the collection of Cigarette Tax.

Article 11 requires Cigarette Taxpayers to settle the underpayment within a maximum period of 30 calendar days from the date the notice is delivered. If the Taxpayer fails to settle the underpayment, the Head of the Customs and Excise Office shall transfer the collection process to the Director General of Fiscal Balance, who will subsequently forward it to the governor for collection in accordance with regional tax collection regulations. Settlement of Cigarette Tax underpayments shall be made to the RKUN through a Collecting Agent using a billing code issued by the Directorate General of Customs and Excise.

Refund of Cigarette Tax Overpayments

Article 32 grants Cigarette Taxpayers the right to submit an application for a refund of Cigarette Tax overpayment to the Head of the Customs and Excise Office. Overpayments may arise due to: (a) calculation errors; (b) payments made for objects that do not constitute Cigarette Tax objects; (c) payments that should not have been payable; and/or (d) refunds of Cigarette Excise.

Specifically for reason (d), the application may be submitted provided that the supporting excise refund document does not exceed the 12-month limitation period from its issuance date. The Head of the Customs and Excise Office shall then issue a Certificate of Cigarette Tax Overpayment, which remains valid for 12 months from its issuance date.

Article 33 regulates that for reasons (a), (b), and (c), refunds shall be made directly to the Taxpayer through restitution. For reason (d), the mechanism depends on the excise refund method: if the excise is compensated against subsequent payments, the Cigarette Tax shall also be compensated; if the excise is refunded in cash, the Cigarette Tax shall likewise be refunded in cash (restitution). Taxpayers choosing restitution are required to submit a written application to the Head of the Customs and Excise Office, accompanied by the Certificate of Overpayment and bank account information, no later than 1 month before the expiration of the certificate’s validity period. If this deadline is exceeded, the application shall be deemed not submitted and the refund entitlement shall lapse.

Pursuant to Article 33 paragraph (8), after the documents are declared complete and compliant, the Head of the Customs and Excise Office shall request the State Treasury Service Office (KPPN) to issue a Certificate of Bookkeeping Completion (SKTB). Subsequently, Article 34 provides that based on such request, the KPPN shall issue the SKTB, after which the Head of the Customs and Excise Office shall submit a refund recommendation letter to the relevant authority, namely to the Directorate General of Customs and Excise (for the Central Government law enforcement portion) and to the Directorate General of Fiscal Balance (for the Regional Government portion). Thereafter, the State General Treasurer Budget User Authority for Revenue and Withholding shall issue the SKP-KP2R, the Commitment Making Officer (PPK) shall issue the Payment Request Letter (SPP), the Payment Order Signing Officer (PPSPM) shall conduct verification and issue the Payment Order (SPM), and finally KPPN Jakarta II shall issue the Fund Disbursement Order (SP2D) for the disbursement of the refund.

 

Closing

MOF Regulation 26/2026 establishes comprehensive guidelines concerning the collection, withholding, and remittance of Cigarette Tax. The regulation sets a rate of 10% of Cigarette Excise on taxable objects that include electronic cigarettes (with exemptions for sliced tobacco, molasses tobacco, snuff tobacco, and chewing tobacco), and requires a minimum earmarked regional allocation of 50% for Health Insurance contributions (37.5%), other health services (minimum 7.5%), and law enforcement (maximum 5%), which will become effective in 2027. Through the clarification of collection mechanisms for underpayments and restitution/compensation mechanisms for overpayments, this regulation is intended to strengthen regional government discipline, ensure the continuity of Health Insurance funding, and optimize law enforcement in the excise sector.