Tax Penalty Reduction Regulation Revised: Official DGT Statement

JAKARTA, DDTCNews – Director General of Taxes Bimo Wijayanto has stated that one of the principal changes introduced by the Minister of Finance Regulation (MoF Reg.) No. 71/2026 is an adjustment to the tax liability payment mechanism.

Under the previous regulation, payments made by taxpayers were allocated on a proportional basis between the principal tax liability and administrative penalties. Under MoF Reg. 71/2026, however, payments will first be applied to settle the principal tax liability.

"Through this adjustment, a taxpayer's payment may first be applied to settle the principal tax liability, thereby giving the taxpayer the opportunity to discharge their principal obligation whilst also taking advantage of the facilities for reduction or nullification of administrative penalties pursuant to the applicable provisions," he said in an official statement on Monday (12/10/2026).

Bimo expressed his hope that the revised mechanism would make it easier for taxpayers to fulfil their tax obligations.

With the new provisions in place, he added, taxpayers would also have the opportunity to settle their principal tax obligations more swiftly and obtain certainty in the resolution of their tax liabilities.

Beyond that, the policy under MoF Reg. 71/2026 is also expected to assist taxpayers in maintaining cash flow resilience, particularly micro, small and medium enterprises (MSMEs), whilst supporting the continuity and growth of their businesses.

"We hope that this improvement will help taxpayers fulfil their obligations more effectively, whilst supporting the realisation of an increasingly fair and effective tax system," said Bimo.

In addition, MoF Reg. 71/2026 also refines the submission period for the response letter arising from the examination of an objection, and clarifies the provisions on reduction or nullification of administrative penalties.

The regulation further affirms that administrative penalties arising from the objection, appeal or civil review process may not be submitted for reduction or nullification through the mechanism provided under those provisions.

From a fiscal perspective, Bimo considers that this policy improvement may accelerate the settlement of outstanding principal tax liabilities and strengthen voluntary taxpayer compliance.

He noted that MoF Reg. 71/2026 also includes transitional provisions aimed at providing legal certainty in the implementation of the regulatory changes.

"The Directorate General of Taxes (DGT) will continue to disseminate information and provide assistance for these provisions to be properly understood and implemented by all parties," Bimo affirmed.

For information, MoF Reg. 71/2026 is an amendment to MoF Reg. 118/2024 and has been in force since its promulgation on 2 October 2026. (rig)