Micro, small, and medium enterprises (MSMEs) are taxpayers that are given a special rate of 0.5% of the gross turnover received by the WP. Based on Government Regulation Number 55 of 2022, individual taxpayers receive an incentive in the form of not being subject to MSME tax if their turnover is up to IDR 500 million. This provides a breath of fresh air for individual taxpayers in running their business activities because their income is not reduced by taxes. In order to take advantage of this rate, taxpayers try to keep their turnover at up to IDR 4.8 billion. One way to do this is by splitting gross turnover to other/new companies (business splitting).
Business splitting has become a serious issue in the MSME sector, as it allows taxpayers to continue using MSME tax rates. The Ministry of Finance will follow up on business splitting practices carried out by businesspeople. According to Finance Minister, the government should have a database to track business splitting practices by MSME taxpayers. The issue of business splitting has often been discussed among MSME business owners since the introduction of special MSME tax rates. However, this business splitting can indirectly harm the state, because businesses with a gross turnover of Rp 4.8 billion or more should switch to using income tax installments under Article 25, but instead choose to use MSME taxes.
For information, the Coordinating Ministry for Economic Affairs previously highlighted the practice of business splitting by business actors in order to continue to take advantage of the final income tax rate for MSMEs at 0.5%. However, the government will extend the period for utilizing the final income tax for MSMEs until 2029, specifically for MSMEs that are individual taxpayers. In addition, the Minister of Finance will also postpone tax collection by marketplace providers. This postponement of income tax collection under Article 22 is being done so that the national economy can recover and grow by 6%.
Business restructuring carried out by taxpayers to limit turnover to IDR 4.8 billion and not exceed IDR 4.8 billion can be detrimental to the state. Therefore, it is essential for taxpayers to be honest about their gross turnover received over a year.
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.
