As the year-end holiday season approaches, the Minister of Finance has announced a new fiscal incentive aimed at easing travel costs and supporting the aviation industry through regulation No. 71/2025 (“PMK-71”). Through this, the government will bear some portion of Value Added Tax (VAT DTP) on domestic commercial air transport services during the Christmas 2025 and New Year 2026 period.

Generally, the provision of air transport services is subject to 11% VAT. However, during the incentive period, this VAT will be shared between passengers and the government. Passengers will pay only 5%, while the remaining 6% will be borne by the Government as part of the 2026 State Budget (APBN).

Under this regulation, passengers flying economy class on domestic routes will enjoy partial VAT relief for tickets purchased between 22 October 2025 and 10 January 2026, with the actual flight taking place between 22 December 2025 and 10 January 2026. If a passenger buys a ticket outside these dates or travels in a different class, the standard 11% VAT applies in full, with no government coverage.

The regulation also outlines detailed compliance obligations for the airlines. They must issue valid tax invoices or equivalent documents—including tickets or airway bills—and report the transactions in their monthly VAT returns (SPT Masa PPN). In addition, they are required to submit a detailed report of all VAT DTP transactions electronically via the Directorate General of Taxes (DGT) portal no later than 30 April 2026. Failure to submit this report on time—or inaccuracies in reporting—will result in the revocation of the VAT DTP facility, meaning that the full VAT amount will again become payable by the passenger.

In summary, PMK-71 represents another example of how fiscal instruments can be used strategically to balance public welfare with economic support. By sharing part of the VAT burden, the government effectively reduces the cost of air travel for the public, while also sustaining the financial stability of national airlines during one of the busiest travel windows of the year.

The regulation officially took effect on 15 October 2025.