Corporate restructuring is commonly undertaken to strengthen operations, simplify group structures, or support long-term growth strategies. In practice, however, tax implications often receive attention only after transactions are completed. It is at this stage that unforeseen risks tend to arise.
Entering early 2026, the Indonesian government issued PMK No. 1/2026 as the fourth amendment to PMK No. 81/2024 on the Core Tax Administration System. This amendment introduces important adjustments to the tax treatment of mergers, consolidations, spin-offs, and acquisitions.
Although technical in nature, these provisions have a direct impact on how companies plan and execute restructuring processes.
A MORE FLEXIBLE VALUATION FRAMEWORK
One of the key changes under PMK 1/2026 is the renewed possibility of using book value in certain restructuring transactions. Previously, transfers of assets or shares were generally required to be valued at market value, often triggering immediate tax liabilities at the time of restructuring.
Under this regulation, taxpayers may apply for the use of book value provided that specific requirements are met and approval is obtained from the tax authority. From a practical perspective, this policy offers greater cash flow flexibility and improved planning opportunities, particularly for internal restructurings or group reorganization initiatives.
Nevertheless, such flexibility is not automatic and remains subject to a clearly defined supervisory framework.
ELIGIBLE RESTRUCTURING UNDER PMK 1/2026
In addition to reaffirming the use of book value, PMK 1/2026 clarifies the types of taxpayer restructuring that may apply for this facility, including:
- taxpayers that are not yet listed as public companies, where the spin-off is conducted as part of an IPO preparation;
- publicly listed taxpayers, provided that all resulting entities from the spin-off also proceed with an IPO;
- corporate taxpayers undertaking the separation of sharia-based business units in accordance with prevailing regulations;
- domestic corporate taxpayers, where the resulting entity from the spin-off receives additional capital of at least IDR 500 billion; and
- state-owned enterprises (BUMN) receiving state capital injections in the context of establishing a BUMN holding structure.
BUSINESS PURPOSE AS A CENTRAL REQUIREMENT
PMK 1/2026 continues to place the business purpose test as a central requirement. Restructuring must be driven by genuine commercial reasons and reflected in post-transaction operations, such as functional integration, business consolidation, or changes in decision-making structures.
The principle of substance over form remains decisive. Transferred assets or businesses must continue to be operated by the receiving entity for a minimum period. Transactions carried out solely to obtain tax benefits, without sufficient economic substance, remain subject to potential correction by the tax authority.
PRACTICAL IMPLICATIONS FOR COMPANIES
These adjustments reaffirm that tax can no longer be treated merely as a compliance issue addressed at the final stage of restructuring. Companies are required to align tax, legal, and commercial considerations from the outset.
Clear documentation of business objectives, operational continuity, and post-transaction plans is essential to support the use of book value and to mitigate the risk of future disputes.
NAVIGATING CORPORATE RESTRUCTURING WITH GREATER CONFIDENCE
PMK 1/2026 clarifies the direction of Indonesia’s tax policy in the context of corporate restructuring. Companies with robust planning and strong business substance will be better positioned to manage both opportunities and risks.
Moores Rowland Indonesia supports companies throughout the corporate restructuring process, from transaction planning and tax structuring to risk assessment and ongoing compliance. With the right approach, restructuring can remain both strategic and sustainable.
For further discussion or advisory support, contact us for a free consultation.
