Minister of Finance Regulation Number 43 of 2026 Provides Government Borne VAT on Domestic Airline Tickets During the School Holiday Period

Introduction

On 20 June 2026, the Ministry of Finance issued Minister of Finance Regulation Number 43 of 2026 on Value Added Tax on the Supply of Scheduled Domestic Commercial Air Transportation Services in Economy Class During the School Holiday Period Borne by the Government for Fiscal Year 2026 (“MOF Regulation 43/2026”), which came into effect on 22 June 2026. The Government has provided a fiscal incentive to reduce the burden of air transportation costs borne by the public during the school holiday period.

The Government seeks to maintain public purchasing power during the school holiday season while also promoting national economic growth by bearing the Value Added Tax (“VAT”) imposed on economy-class air transportation services. The Government expects that the public will be able to take advantage of school holidays at a more affordable cost, thereby increasing tourism activities and domestic mobility.

Key Provisions

Provision of Government-Borne VAT Incentives for Domestic Air Transportation Services

Pursuant to Article 2 paragraph (3), the Government provides a subsidy in the form of Government-Borne VAT amounting to 100% of the VAT payable on the supply of scheduled domestic commercial air transportation services in economy class during Fiscal Year 2026. This incentive covers VAT payable on the base fare component and the fuel surcharge.

Limitations on Ticket Purchase and Flight Periods

Based on Article 3 paragraph (1), eligibility for the Government-Borne VAT facility is subject to the following time limitations:

●      Ticket Purchase Period: 22 June 2026 to 5 July 2026.

●      Flight Period: 24 June 2026 to 5 July 2026.

If the ticket purchase date or flight schedule falls outside the specified periods, the VAT on the air transportation service will not be borne by the Government and will instead be imposed in accordance with the general tax provisions.

Administrative Obligations of Air Transportation Business Entities

Referring to Articles 4 and 5, Air Transportation Business Entities, acting as Taxable Entrepreneurs (“PKP”), have administrative obligations to support the implementation of this incentive, namely:

1. To issue Tax Invoices or documents treated as equivalent to Tax Invoices (such as tickets) that state the amount of VAT borne by the Government.
2. To report the Government-Borne VAT in the Periodic VAT Return (SPT Masa PPN) under the section for supplies receiving tax facilities.
3. To prepare and submit an electronic detailed transaction list of Government-Borne VAT through the system provided by the Directorate General of Taxes no later than 30 September 2026.

Additional Explanation

The Government has also provided technical guidance through the Annex to MOF Regulation 43/2026 to avoid ambiguity in the calculation process. In general:

●      Tax Components: The 100% VAT incentive applies only to the base fare and fuel surcharge components. Other additional charges, such as seat selection fees and extra baggage fees, remain subject to the normal VAT treatment and are not borne by the Government.

●      Calculation Illustration: Examples are provided for airlines to distinguish between transactions that qualify for the facility (during the school holiday period) and those that do not. Airlines are required to separate the amount payable by consumers (including VAT on additional charges that are not covered by the facility) from the amount borne by the Government.

Closing

MOF Regulation 43/2026 provides a fiscal stimulus to the public through a Government-Borne VAT facility for the purchase of economy-class airline tickets for domestic flights during the 2026 school holiday period. This policy aims to enhance public purchasing power, encourage domestic mobility, and support the growth of the national air transportation and tourism sectors.

In its implementation, Air Transportation Business Entities acting as Taxable Entrepreneurs are responsible for ensuring that all tax administrative obligations are properly fulfilled, including the issuance of Tax Invoices in accordance with applicable requirements and the submission of complete, accurate, and timely reports detailing transactions utilizing the Government-Borne VAT facility. Compliance with these provisions is a primary requirement for the incentive to be granted and utilized by passengers. Air Transportation Business Entities must carefully observe their reporting obligations, as delays or non-compliance in submitting the required reports may result in the revocation of the Government-Borne VAT facility in accordance with the applicable regulations.