Individual limited company have emerged to make it easier for Micro and Small Enterprises (MSMEs) to establish an official business entity. Although the establishment process is relatively easy, it still has tax obligations that must be understood by entrepreneurs. individual limited liability company is a limited liability company established by one person only. Although only established by one person, an individual limited company is still considered a business entity from a tax perspective, and is required to have a corporate tax identification number. In DGT circular letter number SE-20/PJ/2022, an individual limited company is a corporate tax subject. The taxes levied are the income tax and value added tax (VAT).
The income tax rate imposed on individual limited companies is 22% on business profits. However, if the gross turnover reaches IDR50 billion, the Individual limited liability company can utilize a 50% withholding rate which will be calculated from the income tax rate (Article 31E of the Income Tax Law). If the individual limited company falls into the category of micro and small enterprises (MSMEs) with a gross turnover of Rp500 million to Rp4.8 billion in a year, the individual limited liability company can choose to be subject to the MSME final income tax rate of 0.5%. The period of this final MSME income tax rate is 3 years since being registered as a taxpayer. If an individual limited liability company delivers taxable goods or taxable services and has been confirmed as a taxable entrepreneur, then the individual limited company has the obligation to collect, deposit, and report value added tax (VAT). Confirmation as a taxable entrepreneur is required if the gross turnover in a fiscal year exceeds IDR 4.8 billion. Not only corporate income tax and value-added tax, if an individual limited company has employees, the company is obliged to withhold income tax article 21 on employees and report the withholding in the monthly income tax article 21 return and also withhold income tax article 23 if making payments to other parties for certain services.
In addition to carrying out tax payments, individual limited companies also have administrative responsibilities in the form of periodic tax reporting. This is realized through the submission of the annual corporate income tax fiscal letter, for individual limited companies that have the status of taxable entrepreneurs are required to report the VAT period fiscal letter.
By Olina Rizki Arizal – Partner TBrights
TBrights is a tax consultant in Indonesia which is currently an integrated business service in Indonesia that can provide comprehensive tax and business services.
Reference:
- Circular Letter of the Directorate General of Taxes Number SE-20/PJ/2022 Concerning Registration and Granting of Taxpayer Identification Number and Imposition of Income Tax for Individual Companies
- Law of the Republic of Indonesia Number 36 of 2008 Concerning the Fourth Amendment to Law Number 7 of 1983 Concerning Income Taxes
