Indonesia Amends MSME Tax Rules: PT, CV to Get Normal Rate

TEMPO.CO, Jakarta - The government has officially revised the regulation on the 0.5 percent Final Income Tax (PPh) for micro, small, and medium enterprises (MSMEs) through Government Regulation (PP) Number 20 of 2026 concerning Regulation Adjustments in the Income Tax Sector.

PP Number 20 of 2026 serves as an amendment to PP Number 55 of 2022, specifically re-regulating the eligible recipients of the 0.5 percent Final Income Tax facility for taxpayers with certain gross turnovers.

Narrowing the Scope of Beneficiaries

According to the latest rules outlined in PP 20/2026 on Tuesday, June 2, 2026, as quoted by Antara, the 0.5 percent Final Income Tax facility can now only be utilized by individual taxpayers, sole proprietorships established by a single individual, and cooperatives.

Previously, this fiscal facility could be accessed by cooperatives, limited partnerships (CV), firms, limited liability companies (PT), and Village-Owned Enterprises (BUMDes).

Through the amendment of Article 57 paragraph (1), the government now restricts the beneficiaries of this tax facility to just three specific groups of taxpayers.

"Domestic taxpayers with certain gross turnovers subject to Final Income Tax as referred to in Article 56 paragraph (1) are: a. Individual taxpayers; and b. Corporate taxpayers in the form of a sole proprietorship established by 1 (one) person and cooperatives," reads a copy of PP 20/2026.

For cooperatives, this facility can be utilized for up to four years from the initial date of business registration. However, the government provides a transitional grace period for CVs, firms, PTs, and BUMDes that are currently employing the 0.5 percent Final Income Tax rate. After this transition period concludes, these entities will be required to adopt the standard corporate income tax rate.

Furthermore, the government has eliminated the time limit for utilizing the 0.5 percent Final Income Tax rate for individual taxpayers with an annual turnover of up to Rp4.8 billion. Previously, this facility could only be utilized for a maximum of seven years from the date of business registration.

Closing Family and Corporate Loopholes

The government has also tightened loopholes to prevent tax avoidance practices executed through the splitting of businesses into multiple small entities.

Previously, businesses could establish several sole proprietorships to ensure that each individual turnover remained below the Rp4.8 billion threshold. Through Article 57 paragraph (2) letter e of PP 20/2026, the Rp4.8 billion turnover threshold is now calculated based on the combined gross turnovers of the individual taxpayer and all sole proprietorships established under their name.

The government has similarly closed the loophole of dividing business revenues among core family members. Articles 58 paragraph (2) and (3) stipulate that for married couples who have a separate property agreement or manage their tax rights and obligations independently, the Rp4.8 billion threshold is calculated based on the combined turnover of the husband, wife, and all sole proprietorships established by both parties.

"The determination of the total gross turnover as referred to in Article 57 paragraph (2) letter e for the spouses as referred to in paragraph (2) is based on the combination of gross turnovers of the husband and wife as well as all corporate taxpayers in the form of a sole proprietorship established by the husband and wife," the regulation states.

If the total combined turnover exceeds Rp4.8 billion, the business group can no longer utilize the 0.5 percent Final Income Tax facility in the subsequent tax years.

Essentially, this new regulation narrows access to MSME tax schemes for taxpayers whose economic scale has matured into larger corporate operations.

Freelancers and Content Creators Excluded

Furthermore, PP Number 20 of 2026 emphasizes that income earned from services related to freelance work can no longer use the MSME Final Tax schemes.

Freelance work includes independent professionals such as lawyers, accountants, architects, doctors, consultants, notaries, appraisers, and actuaries.

Additionally, the facility does not apply to performing arts and entertainment professionals such as musicians, singers, comedians, actors, models, directors, film crew members, dancers, painters, sculptors, and digital content creators such as influencers, social media celebrities, bloggers, and vloggers.

Other professions explicitly excluded from the MSME Final Tax scheme include athletes, teachers, coaches, advisors, moderators, researchers, translators, advertising agents, project supervisors, business intermediaries, salespersons, insurance agents, and multi-level marketing distributors.

With the discontinuation of the MSME Final Tax facility for these designated professions, the income obtained will be subject to the standard applicable income tax rates.

Read: Purbaya: Indonesia on Track to Meet Rp3,153.6tn Revenue Goal

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