What is a Tax Refund?

A tax refund occurs when a taxpayer has overpaid their taxes. In such cases, the excess amount can be returned to the taxpayer in accordance with applicable regulations.

Government is Preparing a New Regulation

The government is currently in the process of harmonizing a Draft Minister of Finance Regulation regarding procedures for preliminary tax refunds.

This initiative aims to ensure that the regulation is:

• Clear and easy to understand
• Relevant to current conditions
• Able to provide legal certainty for taxpayers

Objectives of the New Regulation

The new policy is designed to:

• Strengthen the tax administration system
• Improve supervision and governance
• Provide better services to taxpayers
• Ensure a more transparent and certain refund process

What Will Change?

Here are some of the key proposed changes:

1. Faster Refund Processing Time

• Income Tax (PPh): maximum of 3 months
• Value Added Tax (VAT/PPN): maximum of 1 month

2. Verification Process Remains
Refund applications will still go through a verification process conducted by the tax authority.

3. Faster Decision Issuance
If all requirements are fulfilled and an overpayment is confirmed, the tax authority can directly issue a refund decision.

Current Status

• The regulation is still under discussion and harmonization
• Full details have not yet been officially announced
• The government will release the final regulation once completed
• The tax authority will provide public education to ensure proper understanding

Target Implementation

The government is targeting the regulation to take effect on:

May 1, 2026

With this new regulation, the tax refund process is expected to become:

• Faster
• More transparent
• More reliable

This policy is also intended to support businesses by improving cash flow certainty and strengthening financial stability.