Minister of Micro, Small, and Medium Enterprises (MSMEs), Maman Abdurrahman, confirmed that the final Income Tax (PPh) rate for MSMEs remains unchanged at 0.5 percent under Government Regulation (PP) No. 20 of 2026 in Jakarta (03/06).

The regulation replaces PP No. 55 of 2022 and reaffirms that there is no increase in MSME tax rates while adjusting the scope and implementation of the incentive system.

Government Confirms No Change in MSME Tax Rate

The government stated that MSMEs will continue to receive a 0.5 percent final income tax facility without any increase in rates.

“For MSMEs, there is no change or increase in taxes. The tax incentive for MSMEs remains at 0.5 percent,” said Minister Maman.

He added that the key difference in the new regulation is that the previous time limitation for using the facility has now been removed.

New PP No. 20 of 2026 Defines Eligibility Rules

Under PP No. 20 of 2026, the 0.5 percent MSME final tax applies to individual taxpayers, individually owned limited liability companies, and cooperatives.

The facility is limited to businesses with a maximum age of four fiscal years and annual turnover not exceeding IDR 4.8 billion.

Previously, PP No. 55 of 2022 also included CVs, partnerships, non-individual PTs, and village-owned enterprises (BUMDes), but these categories are no longer included in the updated regulation.

Policy Change Targets Misuse of Tax Incentives

The government explained that the revision was introduced due to repeated misuse of MSME tax facilities in practice.

“Based on experience, many parties took advantage of this regulation even though they were not entitled to use the MSME final income tax rate. Companies were often split into dozens of small CVs and PTs to continue benefiting from tax incentives. This is not fair,” the minister said.

He emphasized that large businesses with turnover above IDR 4.8 billion should not benefit from incentives designed for MSMEs.

Under the new regulation, CVs, partnerships, non-individual PTs, and BUMDes will now be subject to the standard corporate tax rate of 22 percent.

Transition Period Maintained for Existing Businesses

The government has provided a transition period for entities currently using the MSME tax facility under the previous regulation.

“A transition space is still provided so there is time for administrative adjustment. The government does not immediately implement new rules without giving all parties a chance to prepare,” Minister Maman said.

He added that implementation details of the transition are under the authority of the Directorate General of Taxes.

These businesses may continue using the 0.5 percent rate until their existing entitlement period expires under the old regulation.

Additionally, CVs, partnerships, and non-individual PTs with turnover below IDR 4.8 billion will receive a 50 percent reduction from the normal tax rate, resulting in an effective rate of 11 percent.

Micro and small businesses with annual turnover up to IDR 500 million remain exempt or effectively subject to a 0 percent tax rate.

Long-Term Certainty and Compliance Strengthening for MSMEs

The updated regulation removes the previous seven-year limitation on MSME tax incentives under PP No. 55 of 2022, allowing the 0.5 percent final tax to be used continuously as long as requirements are met.

“The President’s directive is very clear, namely to provide permanent tax relief so that MSMEs have certainty and long-term business sustainability,” said Minister Maman.

The regulation also strengthens governance by ensuring that illegal expenditures such as bribery, gratification, and corruption cannot be used as tax-deductible expenses.

The Ministry of MSMEs will continue supporting implementation through education, assistance programs, and improved administrative systems, including the upcoming SAPA UMKM platform.

PHOTO: MINISTRY OF MSMEs

This article was created with AI assistance.

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