Are PTs, CVs, and Firmas No Longer Eligible for the MSME Final Income Tax Rate? Here Are the Provisions!

The Government has issued Government Regulation Number 20 of 2026 (PP 20/2026), promulgated on April 22, 2026, as an amendment to Government Regulation Number 55 of 2022 (PP 55/2022). Through this new regulation, the Government has stipulated changes regarding who is eligible to utilize the 0.5% MSME Final Income Tax (PPh Final UMKM) rate.

1. New Provisions for the MSME Final Income Tax Rate

Based on PP 20/2026, the MSME Final Income Tax rate is now exclusively designated for Individual Taxpayers (WPOP), Individual Limited Liability Companies (PT Perorangan), and Cooperatives. Meanwhile, other business entities such as standard Limited Liability Companies (regular/non-individual PTs), Limited Partnerships (CV), General Partnerships (Firma), and Village-Owned Enterprises (BUMDes) that are newly registered after this regulation comes into effect can NO LONGER use the 0.5% Final Income Tax rate facility as previously stipulated in PP 55/2022.

a. New Tax Scheme

Business entities excluded from the MSME Final Income Tax rate (other than Individual Taxpayers, Individual PTs, and Cooperatives) that are newly established after PP 20/2026 takes effect are required to apply the General Income Tax Provisions (Article 17 rates of the Income Tax Law) and must maintain bookkeeping.

b. Provisions for PTs/CVs/Firmas/BUMDes Established Before PP 20/2026 Takes Effect

Meanwhile, business entities already registered before PP 20/2026 takes effect that are currently utilizing the 0.5% scheme as regulated in PP 55/2022 will still be granted a transitional period to exhaust the remaining validity period of their facility in accordance with the provisions of PP 55/2022.

2. Tax Rate Reduction Facility for PTs, CVs, Firmas, and BUMDes

Nevertheless, business entities excluded from the MSME Final Income Tax rate can still utilize the facility under Article 31E of the Income Tax Law (UU PPh). This facility provides a 50% rate reduction from the normal tax rate (resulting in an effective rate of 11%) on Taxable Income derived from the portion of gross turnover up to IDR 4.8 billion. This means that as long as their total annual turnover does not exceed IDR 4.8 billion, PTs, CVs, Firmas, and BUMDes can still enjoy a reduced tax burden.

3. Conclusion

Based on the new provisions in PP 20/2026 explained above, it can be assumed that the Government intends to tighten the restrictions to ensure only targeted tax subjects are truly entitled to the MSME Final Income Tax rate. This is certainly good news for Individual Taxpayers, Individual PTs, and Cooperatives. Even so, several business entities excluded from the Final Income Tax rate will still receive rate relief under specific conditions to ensure their business burden does not exceed their financial capacity.