Why Is the Investment Allowance Facility Ignored in Bali
The investment allowance facility sounds generous on paper, especially for Bali projects starting in 2026. Yet many investors, CFOs and even consultants quietly ignore it when modelling after-tax returns.
Under Indonesia’s rules, this incentive promises a 60% net income reduction on qualified investment in labour-intensive industries. For many Bali projects, however, that headline number hides tough eligibility hurdles and limited real savings.
Guidance from the Directorate General of Taxes focuses on national parameters, not on the reality of Bali’s resort, F&B and light manufacturing investors. As a result, many local teams never see a clear, Bali-specific roadmap for using the investment allowance facility.
At the same time, the Ministry of Finance is reshaping tax incentives to fit Global Minimum Tax and 2026 revenue targets. Investors fear today’s facility could be redesigned, challenged or clawed back just when their project starts to stabilise.
For Bali-based PT PMA owners, this creates a credibility problem. If banks, tax advisers and BKPM materials do not highlight the facility, many assume it is either too risky or too small to matter for their hotel, factory or logistics hub.
This article explains, in practical terms, why Bali investors are not using the investment allowance facility and how, with the right structure and advice from the Ministry of Investment BKPM, it might still become a useful tool instead of a forgotten promise.
Table of Contents
- Why the Investment Allowance Facility Stalls in Bali 2026
- How the Investment Allowance Facility Really Works in Practice
- Investment Allowance Facility Versus Other Tax Incentives
- Admin Barriers Blocking the Investment Allowance Facility
- Real Story — Investment Allowance Facility in a Bali Factory
- Why Banks Rarely Promote the Investment Allowance Facility
- Aligning the Investment Allowance Facility With Bali 2026
- Checklist to apply VAT imposition methods in Bali for 2026
- FAQ’s About Investment Allowance Facility
Why the Investment Allowance Facility Stalls in Bali 2026
The investment allowance facility should favour Bali’s labour-intensive sectors in 2026, yet applications remain rare. Many investors still rely on more familiar tax allowance, holiday and super deduction schemes instead of this relatively new tool.
For Bali projects, the timing of profits often clashes with the facility’s six-year deduction window. When early years are loss-making or thinly profitable, the 60% reduction does not translate into meaningful cash savings, so management deprioritises it.
Risk perception also weighs heavily. Investors worry about meeting headcount tests, documentation standards and future audits. With tighter 2026 enforcement and GMT rules, they fear the investment allowance facility could trigger more scrutiny than benefit.
In practice, the investment allowance facility grants up to a 60% net income reduction on eligible tangible fixed assets, including land, spread over six years. Only specific labour-intensive KBLI codes and minimum local headcount thresholds qualify.
For a Bali factory or logistics hub starting operations in 2026, this means mapping every asset into approved lists, providing at least around 300 Indonesian workers and locking assets into the main business for a defined period. Any restructuring may threaten the benefit.
The true value depends on sustainable taxable profit. If a Bali project uses debt, other incentives and accelerated depreciation, its effective tax base may already be low, making the incremental benefit of the investment allowance facility marginal compared to compliance costs.
The investment allowance facility competes with tax allowance, tax holiday and super tax deduction options. Many Bali investors find that a classic tax allowance with accelerated depreciation and extended loss carry-forward gives a smoother benefit profile.
Super deductions for R&D, training or local content can also out-perform the investment allowance facility if a Bali project invests heavily in skills, innovation or TKDN-driven manufacturing. These incentives align better with long-term competitiveness goals.
Because taxpayers generally cannot stack multiple incentives on the same asset base, investors are forced to choose. Many conclude that locking into the investment allowance facility would mean giving up more flexible or larger benefits available through other schemes.
The investment allowance facility requires coordination between OSS, BKPM, the Ministry of Industry and the tax authorities. Applications depend on accurate KBLI classification, business licensing and detailed asset lists uploaded within strict time limits.
Policy socialisation has often been national, not Bali-specific. Several studies and official reports have noted that, years after launch, some sectors still show zero realisation of the facility despite theoretical eligibility.(DDTCNews)
For a Bali-based CFO juggling land licensing, environmental permits and financing, the additional paperwork and perceived uncertainty around the investment allowance facility can feel like one task too many, especially when banks will lend without it.
In 2026, a textile PT PMA near Gianyar planned a new production line and heard about the investment allowance facility from a Jakarta adviser. On paper, the factory’s headcount and KBLI code seemed to meet labour-intensive criteria.
When the team modelled the numbers, they saw only modest incremental tax savings over six years, because existing tax allowance and accelerated depreciation already reduced taxable income. The extra cash benefit did not justify added admin and audit exposure.
After speaking with their bank, which priced loans on projected cash flow rather than tax incentives, the owners decided to keep the simpler structure. They documented their analysis, skipped the investment allowance facility and focused on training and TKDN instead.
From lenders’ perspective, the investment allowance facility does not change collateral or hard cash flow in early years. Banks underwriting Bali hotels, factories or warehouses care more about occupancy, contracts and sponsor strength than incremental tax deductions.
Many banks and non-bank financiers have internal product sheets that highlight tax holidays or proven tax allowance schemes. Relationship managers are rarely trained to explain the detailed conditions behind the investment allowance facility to clients.
Advisors also behave strategically. Some prefer incentives they know will be approved and can be showcased as success stories. With relatively few published examples of successful investment allowance facility claims, they default to safer, more familiar tools.
The investment allowance facility can be more attractive if aligned with Bali’s 2026 priorities: sustainable tourism, green manufacturing, logistics and digital services that create large numbers of local jobs. Incentive design must reflect these sector realities.
If Bali’s regional policies prioritise TKDN, vocational training and green standards, the facility should dovetail with TKDN-related incentives and super deductions rather than compete with them. Investors then see a coherent package, not a confusing menu of options.
Clearer Bali-specific guidance, sector examples and model calculations would help. When investors understand how the investment allowance facility interacts with land rules, HR plans and environmental commitments, they can finally treat it as a serious planning tool.
For 2026 projects, the investment allowance facility should be evaluated alongside tax allowance, holidays and super deductions, not in isolation. Start by mapping your Bali project’s KBLI codes, headcount plan and fixed asset schedule against eligibility rules.
Next, build two or three financial models: with investment allowance facility, with alternative incentives and with no incentives. Comparing after-tax internal rate of return and payback will show whether the incremental benefit justifies the added complexity.
Finally, document governance. Boards should minute why they chose or rejected the investment allowance facility, retain evidence of headcount and asset use and align the choice with overall risk appetite, especially as GMT and 2026 tax reforms tighten enforcement.
It is a super-deduction that lets eligible labour-intensive projects claim up to 60% of qualifying investment as extra net income reduction over six years, reducing corporate income tax if the project generates sufficient taxable profit.
Low awareness, complex requirements, overlapping incentives and modest incremental savings all play a role. Many Bali investors find that traditional tax allowance, holidays or super deductions better match their project risk and cash flow.
Labour-intensive manufacturing, certain logistics and selected support industries with stable headcount and clear KBLI codes have the best chance. Highly seasonal or asset-light tourism models may find the benefit too small or hard to secure.
GMT pushes Indonesia to rely less on broad income-based incentives and more on targeted or refundable credits. Some international groups may see the facility neutralised by top-up tax, so they weigh it against group-wide effective tax strategies.
Not necessarily. It should be treated as one option in a structured comparison. For some asset-heavy, labour-intensive projects, it can still create value, but only after careful modelling and coordination with banks, advisors and tax authorities.
Need help evaluating the investment allowance facility for your Bali project in 2026? Chat with our tax advisory team on WhatsApp today.
