Indonesia funds VAT on holiday economy-class flights

PMK 77/2026 took effect on promulgation and implements a temporary fiscal incentive rather than exempting air transport from VAT. VAT remains due under Indonesia's VAT Law—Law No. 8 of 1983, most recently amended by Law No. 6 of 2023—and is calculated under PMK 131/2024. For qualifying supplies, the government bears 100% of the VAT attributable to the ticket's base fare and fuel surcharge for fiscal year 2027.^[1][2][3]

Both the purchase and travel windows must be met

The relief applies only where the ticket is purchased from 20 October 2026 through 10 January 2027 and the domestic scheduled economy-class flight occurs from 22 December 2026 through 10 January 2027. A booking outside either window, or travel in a class other than economy, does not qualify. The regulation's worked example confirms that a ticket bought within the purchase window for travel on 21 December falls outside the measure because the flight date is too early.^[1]

Ancillary charges remain taxable

The government-borne amount is limited to VAT on the base fare and fuel surcharge. VAT on ancillary services, including extra baggage and seat selection in the regulation's example, continues to be collected from the passenger. Airlines therefore need to separate the qualifying fare components from other consideration rather than treating the full ticket transaction as government-funded VAT.^[1]

Airlines retain invoice and return obligations

A qualifying airline, acting as a taxable entrepreneur, must issue a tax invoice or an approved equivalent document such as the ticket and report the government-borne VAT in the facilities section of its periodic VAT return. Non-qualifying supplies remain reportable as VAT collected by the airline. The measure therefore changes who bears the qualifying VAT, not the underlying invoicing and return architecture.^[1]

Transaction reporting determines access to relief

Airlines must also submit an electronic transaction schedule containing their name and tax number, ticket month and booking reference, departure and arrival airports, purchase and flight dates, the base-fare and fuel-surcharge tax base, and the government-borne VAT. The schedule follows the relevant VAT return period but must be submitted no later than 31 March 2027. Late submission removes the government-borne treatment, leaving VAT payable under the ordinary rules. Groups operating Indonesian carriers or managing high-volume domestic business travel should align booking data, invoice coding and return evidence before that deadline.^[1]