Tax Treatment of Individual Limited Liability Companies (PT Perorangan) Based on the Job Creation Law and Related Regulations

Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law (Job Creation Law) introduces a new entity concept called the Individual Limited Liability Company (Perseroan Perorangan or PT Perorangan). This breakthrough aims to provide ease for micro and small enterprises (MSEs) to obtain formal corporate legal status with flexible capital requirements.

As a formal legal entity, a PT Perorangan has distinct implications within the Indonesian tax system. Below is a comprehensive explanation regarding the tax treatment of a PT Perorangan based on the prevailing tax laws and regulations:

1. The Position of PT Perorangan as a Corporate Taxpayer

Based on the provisions of the Directorate General of Taxes (DGT) through Circular Letter SE-20/PJ/2022, a PT Perorangan is categorized as a Corporate Taxpayer (Wajib Pajak Badan), not an Individual Taxpayer (Wajib Pajak Orang Pribadi). As a corporate tax subject, a PT Perorangan is obligated to:

• Register to obtain a Taxpayer Identification Number (NPWP) under the name of the business entity.
• Maintain proper and orderly fiscal bookkeeping.
• Submit the Annual Corporate Income Tax Return (SPT Tahunan PPh Badan).

2. Income Tax (PPh) Tariff Schemes for PT Perorangan

The Income Tax treatment for a PT Perorangan generally depends on the amount of gross turnover (peredaran bruto) earned in one tax year:

a. The 0.5% MSME Final Income Tax Scheme:

Referring to Government Regulation (PP) Number 55 of 2022, which was later updated through PP Number 20 of 2026, a PT Perorangan with an annual turnover not exceeding IDR 4.8 billion is entitled to utilize the Final Income Tax rate of 0.5% applied to the monthly gross turnover.

b. Normal Corporate Income Tax Scheme (22%):

If the PT Perorangan's turnover exceeds IDR 4.8 billion in a year, or if the company chooses to opt into the general tariff, it must use the normal Corporate Income Tax calculation. The current general Corporate Income Tax rate is 22% of the Taxable Income (Fiscal Net Profit). However, a PT Perorangan can still utilize the facility under Article 31E of the Income Tax Law, which provides a 50% tariff reduction (bringing the effective rate to 11%) on Taxable Income derived from the portion of gross turnover up to IDR 4.8 billion.

3. No Entitlement to the IDR 500 Million Tax-Free Turnover Facility

Based on the Harmonization of Tax Regulations Law (UU HPP) and its derivative regulations, there is a tax incentive providing a tax-free turnover threshold of up to IDR 500 million per year. However, this facility only applies to Individual Taxpayers. Because a PT Perorangan holds the status of a Corporate Taxpayer, the company must pay the 0.5% Final Income Tax directly from the very first rupiah of turnover earned, without any IDR 500 million deduction.

4. Conclusion

Similar to a regular Limited Liability Company (PT), a PT Perorangan established under the Job Creation Law is categorized as a Corporate Taxpayer. Nevertheless, its tax treatment heavily depends on the company's annual turnover; a PT Perorangan with a turnover below IDR 4.8 billion per year is entitled to the 0.5% MSME Final Income Tax facility. However, due to its corporate taxpayer status, a PT Perorangan is not entitled to the IDR 500 million tax-free turnover threshold facility that is typically enjoyed by individual business owners.