Using Pharmaceutical Raw Materials Tax Rules in Indonesia
In 2026, many Bali distributors and clinics depend on imported pharmaceutical raw materials without fully understanding how Indonesia taxes them. The result can be painful surprises at customs, higher costs, and stalled production.
Indonesia applies customs duty, import VAT, and import income tax to most pharmaceutical raw materials, but also offers targeted facilities. Official guidance from the Indonesian tax authority shows how health and investment policies now interact.
For Bali readers, the challenge is mapping national rules onto real shipments: APIs cleared through Java ports, excipients stored in Bali warehouses, and local entities that may not yet have the right importer status or investment scheme.
Misclassifying pharmaceutical raw materials under the wrong HS code or claiming the wrong facility can trigger corrections, fines, and even loss of incentives. This is especially sensitive where health-law incentives or investment schemes require strict documentation.
Handled properly, Indonesia’s tax framework can support stable pricing and supply. Planned use of facilities helps Bali-based hospitals, pharmacies, and manufacturers keep essential pharmaceutical raw materials flowing without breaching rules.
This guide unpacks core taxes, health-law incentives, broader investment facilities, and the compliance steps Bali businesses should take before scaling their pharmaceutical raw materials imports in 2026.
Table of Contents
- Why Pharmaceutical Raw Materials Taxes Matter in 2026
- Core Indonesian Taxes on Pharmaceutical Raw Materials Imports
- Health Incentives for Pharmaceutical Raw Materials in 2026
- Real Story — Pharmaceutical Raw Materials for a Bali Clinic
- Import Duty Relief on Pharmaceutical Raw Materials in Indonesia
- Compliance Risks When Importing Pharmaceutical Raw Materials
- Planning Bali Supply Chains for Pharmaceutical Raw Materials
- Checklist for Managing Pharmaceutical Raw Materials Tax
- FAQ’s About Pharmaceutical Raw Materials Tax Rules
Why Pharmaceutical Raw Materials Taxes Matter in 2026
For Indonesia’s health security, pharmaceutical raw materials are strategic. Most APIs are still imported, so every tax charge on each shipment affects the final cost of medicines reaching Bali clinics and pharmacies.
Higher landed costs can make local products less competitive compared with imported finished drugs. If tax on pharmaceutical raw materials is not planned, discount pressure pushes margins down for local distributors and manufacturers.
For Bali-based players, understanding how Indonesia taxes pharmaceutical raw materials is also a regulatory risk issue. Customs and DJP watch the sector closely because of high values, sensitive products, and frequent use of tax facilities.
When pharmaceutical raw materials enter Indonesia, customs calculates a customs value from price, freight, and insurance. Duty then follows the HS code and origin, with MFN tariffs for most sources and possible FTA reductions for qualifying countries.
On top of duty, import VAT is charged at the prevailing rate, moving toward 12 percent in recent policy. For many pharmaceutical raw materials, this VAT is creditable, but only if the importer is properly registered and using the inputs in taxable activities.
Most imports also attract Article 22 import income tax. Approved importers typically face around 2.5 percent on pharmaceutical raw materials, while non-API importers can face higher rates. This amount usually becomes a prepayment credit against annual income tax.
Some COVID-era facilities temporarily exempted VAT on imported pharmaceutical raw materials used directly for health emergencies. While many were time-bound, they set a precedent for future targeted relief in pandemics or critical shortages.
Under the new health framework, regulators now link incentives more tightly to national health objectives. For example, manufacturers producing essential medicines from pharmaceutical raw materials that reduce import dependence may access more generous relief.
Bali businesses involved in warehousing or secondary processing of pharmaceutical raw materials should track how national health incentives are defined. Eligibility may depend on product lists, licensing, and evidence that inputs feed into critical health programs.
A small Bali clinic network wanted to import pharmaceutical raw materials for compounding customized treatments. They assumed their existing trading company could manage imports using standard HS codes and regular VAT credits.
Customs challenged the HS classification and origin status of some pharmaceutical raw materials, raising duty and Article 22 liabilities. At the same time, DJP queried whether the entity’s main activity was truly manufacturing or just trading.
With specialist help, the group restructured its supply chain, using a correctly licensed entity and clearer HS classification. By aligning their pharmaceutical raw materials imports with health-sector priorities, they later qualified for more favorable treatment.
Indonesia’s incentive system allows duty relief on pharmaceutical raw materials used as inputs in domestic manufacturing, especially when final products are taxable and support national priorities such as health security.
Manufacturers can apply for schemes where pharmaceutical raw materials and machinery are imported with reduced or zero duty, subject to quotas, time limits, and strict reporting of how inputs are consumed in production.
Investors targeting long-term production of pharmaceutical raw materials may also access tax holidays or tax allowances. Bali-based investors often coordinate with central agencies using resources like Indonesia investment incentives before committing capital.
The biggest risk is misclassifying pharmaceutical raw materials under HS codes that do not match their actual chemical nature or intended use. Customs may reclassify with higher duty, and DJP can adjust VAT and income tax positions.
Importer status also matters. If you import pharmaceutical raw materials without proper API licensing or health approvals, authorities can treat transactions as non-compliant and deny access to incentives or even seize goods.
Finally, claiming facilities without tight documentation is dangerous. If you cannot prove that incentivized pharmaceutical raw materials were actually used in the promised production, expect back-duties, VAT corrections, and potential penalties.
Even if factories sit outside Bali, many pharmaceutical raw materials flow through Bali-based distributors, clinics, and pharmacies. That makes local planning, contracts, and documentation crucial for clean tax positions.
Bali entities should map their role: importer, toll manufacturer, distributor, or service provider. Each position changes how pharmaceutical raw materials are taxed, how VAT is credited, and who can benefit from incentives.
Before signing new supply contracts, model different scenarios for pharmaceutical raw materials flows. Where possible, align contracts with manufacturing or health incentives and confirm that licenses, HS codes, and invoices all match the intended structure.
A practical checklist keeps pharmaceutical raw materials tax risk under control. Start with HS code confirmation, written classification support, and origin documentation for each key API and excipient.
Next, verify your importer status, health licenses, and investment registrations. If you plan to use incentives for pharmaceutical raw materials, make sure facility approvals, quotas, and reporting duties are formally documented.
Finally, establish a periodic review of pharmaceutical raw materials tax positions. Include reconciliations of customs, VAT credits, and Article 22 prepayments, plus mock-audit files ready for customs or DJP inspection in Bali or elsewhere.
Most pharmaceutical raw materials face customs duty, VAT, and import income tax. However, specific health-sector or investment incentives can reduce or waive some charges when strict conditions are met.
HS codes determine duty rates and influence eligibility for facilities. For pharmaceutical raw materials, incorrect codes can cause underpayments, post-clearance corrections, and disputes with customs and the tax office.
Small clinics may benefit indirectly, but many incentives target manufacturers or large-scale processors. Clinics handling pharmaceutical raw materials should confirm status with advisors or their KPP before assuming relief applies.
FTAs can lower duty if pharmaceutical raw materials qualify under origin rules. You still pay VAT and import income tax, but the total landed cost may drop. Check certificate-of-origin requirements and product coverage for each FTA.
The rules are complex, especially where pharmaceutical raw materials intersect with health-law incentives. Many investors work with specialist advisors or chambers, using sources like Indonesia tax guidance as a starting point.
Need help aligning Indonesia tax rules with your pharmaceutical raw materials strategy? Our specialist advisor can review them for u
