The Ministry of Finance, through the Directorate General of Taxes, will change the provisions on the 0.5% final income tax rate, known as the MSME income tax. This is due to indications of manipulation of gross circulation in order to take advantage of this rate. Based on data from the Ministry of MSMEs as of December 31, 2024, there are 30,178,617 MSMEs in Indonesia, consisting of 30,089,488 micro businesses, 73,816 small businesses, and 15,313 medium businesses. The Directorate General of Taxes has discovered tax planning strategies that are not in line with taxation policies. The tax planning strategy involved taxpayers allegedly withholding revenue so that it would not exceed IDR 4.8 billion in order to continue using the MSME income tax rate. To withhold revenue, taxpayers split their revenue by establishing new companies to accommodate the withheld revenue so that the old companies could meet the requirements for the 0.5% income tax rate.
In the Regulation to be issued by the Government, the Government will amend Article 57 paragraphs 1 and 2 to re-regulate taxpayers receiving a 0.5% income tax facility. In addition, the Government will also adjust the definition of gross turnover through a revision of Article 58. The Directorate General of Taxes proposes that all gross turnover subject to final income tax, non-final income tax, and foreign income tax be used as the basis for determining taxpayers who can use the 0.5% income tax facility. In this way, it is hoped that taxpayers who have exceeded IDR 4.8 billion will no longer be able to use the 0.5% tax facility.
On the other hand, the government is also considering requests from MSME players for the 0.5% tariff incentive to continue, and the government will accept the requests of MSME players and extend it until mid-2029. The government plans to remove the 0.5% tariff period through a revision of Government Regulation No. 55 of 2022, Article 59. The government will also add a new provision to meet international standards in the form of Article 20A, which regulates bribery costs, gratuities, and administrative and criminal sanctions that cannot be deducted from gross income.
The 0.5% income tax rate is very helpful for MSMEs because it can ease the burden on MSME players who are trying to maintain their businesses amid economic uncertainty. MSME players are also expected to be wise in using the 0.5% income tax facility. If the turnover has reached IDR 4.8 billion, entrepreneurs should be honest and not engage in tax planning by splitting their turnover.
By Olina Rizki Arizal – Partner
TBrights is a tax consultant in Indonesia that is currently an Integrated Business Service in Indonesia that can provide comprehensive tax and business services
