More about TKDN – In the world of industry and commerce, the term Domestic Component Level (TKDN) often appears, especially in the context of regulation and procurement.
TKDN refers to the percentage of component value in a product that comes from domestic sources.
Understanding the types of TKDN is essential for companies looking to comply with government regulations and increase competitiveness in the market.
In this article, we will elaborate on what TDKN and the different types of TKDN component levels are, and how they affect business policies and practices in Indonesia.
Check out the explanation until the end!
What is TKDN?
The Domestic Component Level (TKDN) is the amount of domestic content in goods, services, and a combination of goods and services.
TKDN is part of the government’s policy to increase the use of domestic products which aims to empower domestic industries and strengthen the industrial structure.
We can evaluate the TKDN of machine manufacturing by examining the materials, the production process, and the human resources (HR) involved. Whether the processes and materials used are of domestic origin and whether the human resources involved consist of local or foreign workers. According to PP No 29/2018 on Industrial Empowerment, users of domestic products are obliged to use these products as follows:
- State institutions, ministries, non-ministerial government agencies, other government agencies, and regional work units in the procurement of goods/services if the source of funding comes from the APBN, APBD, including loans or grants from within or outside the country.
- SOEs, BUMDs, state-owned legal entities, and private business entities procure goods and services by utilizing financing from the APBN or APBD, as well as cooperating with the central government and/or local governments.
In the procurement of goods or services, domestic products must have a combination of TKDN value and Company Benefit Weight (BMP) value of at least 40%.
Such products must achieve a TKDN value of at least 25%. However, the Minister of Industry can set higher TKDN limits for certain industries when necessary.
TKDN for Goods
The calculation of TKDN for goods includes the percentage of the domestic component of the materials used, the nationality of the workforce, and the ownership and country of origin of the tools. Companies calculate TKDN for each type of good based on the same production process and raw materials. If the company produces different types of goods with different production processes and raw materials, the company must calculate TKDN separately for each type of goods.
TKDN for Services
The calculation of the TKDN component of services includes the nationality of labor, the use of tools and work facilities, and general services in the implementation of services. The calculation of costs includes all expenses to produce services until they reach the work location (On Site).
TKDN for Combined Goods and Services
The last type is the calculation of the TKDN component of goods and services, which is a combination of the previous two points.
This process includes calculating the local component of raw materials/materials and work equipment, as well as integrating labor, general services, construction/fabrication, and work facilities.
The more of these components are of domestic origin, the higher the TKDN value of the product.
What are the Benefits of TKDN Implementation?
In short, the implementation of TKDN can minimize imported products and increase the competitiveness of domestic products.
Here is the explanation:
- New Jobs Created
New jobs are created because TKDN focuses on the utilization of domestic goods and services.
In addition, TKDN also aims to increase the use of domestic production.
This is certainly related to the higher demand for domestic labor.
- Foreign Exchange Savings
TKDN is beneficial for saving foreign exchange, which has to do with minimizing dependence on imported or foreign products.
Government spending will become more optimized and focused on the domestic sector.
- Increase Income Tax Revenues
Optimizing TKDN will increase income tax revenue. Domestically made products will increase dramatically, so we need to optimize and promote these strategic aspects.
- Support for Domestic Economy
This affects the healthy competition between domestic and foreign products.
In short, TKDN will be a reference to improve domestic products to be equal to international products in terms of quality.
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Understanding and implementing TKDN correctly is essential to fulfill government regulations and improve the competitiveness of domestic products.
With this knowledge, companies can contribute to the development of local industries, create jobs, and reduce dependence on imported products.
For those of you who need assistance in TKDN implementation or back office management, business consulting, or legal research, Kontrak Hukum is ready to help.
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