Home SUBJECT MATTER EXPERT MSME Tax (Tax for Micro, Small, and Medium Enterprises)
SUBJECT MATTER EXPERT

MSME Tax (Tax for Micro, Small, and Medium Enterprises)

Taxindo Prime Consulting • 31 Juli 2025
MSME Tax (Tax for Micro, Small, and Medium Enterprises)
UMKM Tax (Tax for Micro, Small, and Medium Enterprises)

I. Introduction
Micro, Small, and Medium Enterprises (MSMEs) (Usaha Mikro, Kecil, dan Menengah / UMKM) are the backbone of the national economy, employing the majority of the workforce and serving as the driving force behind economic growth. However, a business's success is not only measured by its turnover but also by its compliance with applicable regulations, including taxation. Understanding tax is not just about fulfilling an obligation, but also about building a strong, legal, and professional business foundation.

II. Legal Basis and MSME Categories
The definition of MSMEs is outlined in the prevailing regulation, namely Government Regulation (PP) Number 7 of 2021. Business categories are determined based on annual turnover (omzet tahunan):
  • Micro Enterprise (Usaha Mikro): Has an annual turnover up to IDR 300 million.
  • Small Enterprise (Usaha Kecil): Has an annual turnover exceeding IDR 300 million up to IDR 2.5 billion.
  • Medium Enterprise (Usaha Menengah): Has an annual turnover exceeding IDR 2.5 billion up to IDR 50 billion.

Specifically for taxation, the key foundational regulation is Government Regulation (PP) Number 55 of 2022. This regulation provides significant ease for MSMEs to fulfill their tax obligations more simply.

III. The Advantageous 0.5% Final Income Tax (PPh Final) Scheme
One of the biggest innovations in MSME taxation is the implementation of the Final Income Tax (PPh Final) scheme. This scheme is designed to simplify tax calculation and payment, where the tax is calculated based on total turnover, not net profit.
  • Rate and Turnover Limit: The applicable rate is 0.5% of the gross monthly turnover. This scheme can be used by individual or corporate taxpayers with a turnover not exceeding IDR 4.8 billion in one tax year.
  • Non-Taxable Turnover Incentive: This policy is a welcome relief for micro-MSMEs. According to PP 55 of 2022, individual taxpayers (Wajib Pajak orang pribadi) are granted a tax exemption for turnover up to the first IDR 500 million in a year. This means you only have to pay the 0.5% tax on turnover that exceeds the IDR 500 million limit.
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Example: If your monthly turnover is IDR 50 million, your annual turnover is IDR 600 million. With this incentive, the taxable turnover is only IDR 100 million (IDR 600 million - IDR 500 million). Thus, the total tax you must pay in a year is only 0.5%×IDR 100 million=IDR 500,000.


IV. Other Relevant Taxes
In addition to PPh Final, several other types of taxes may be relevant for MSMEs, depending on the scale and type of business.
  • Value Added Tax (VAT / PPN): If your annual turnover exceeds IDR 4.8 billion, you are required to become a Taxable Entrepreneur (PKP) (Pengusaha Kena Pajak). As a PKP, you are obliged to collect VAT at a rate of 11% on every sale and remit it to the state.​​​​​​​
  • Regional Tax (Pajak Daerah): This is a tax collected by the local government, and the rules can differ in each region. Examples include Restaurant Tax (if you have a culinary business), Advertisement Tax (Pajak Reklame), or Parking Tax.

V. Tax Payment and Reporting Process
The tax administration process for MSMEs has also been simplified:
  • Tax Payment: PPh Final is paid monthly. You can create a billing code through the DJP Online application or other channels, and then pay it via a bank, post office, or digital payment channels.
  • Tax Reporting: Although the tax is paid monthly, you still have an obligation to report all your income in the Annual Tax Return (SPT Tahunan). This SPT must be submitted once a year, no later than March 31st for Individual Taxpayers.

VI. Practical Tips and Recommendations
  • Importance of Bookkeeping: Keep simple and neat records of your daily or monthly turnover. This will make it easier for you to calculate tax, manage finances, and prepare reports when needed.
  • Access Official Information: Always refer to official sources from the Directorate General of Taxes (DGT/DJP) via their website or social media to get accurate and up-to-date information.
  • Utilize the Incentive: Ensure that as an Individual Taxpayer, you do not pay PPh Final on the first IDR 500 million of your annual turnover.
Taxindo Prime Consulting (TPC) is a firm specializing in tax, accounting, business, and business law consulting.
Taxindo Prime Consulting (TPC) is a firm specializing in tax, accounting, business, and business law consulting. We offer a comprehensive range of advisory services that provide objective, in-depth, and independent education, advice, and solutions for all tax, accounting, and business issues.
Our services cover various aspects of taxation, accounting, and business law. These include, but are not limited to, domestic tax consulting, international tax consulting, transfer pricing documentation, tax audit assistance, tax dispute resolution (litigation), tax planning and tax management, tax due diligence, transaction structuring, tax review for planned transactions, customs services, business and accounting consulting, and legal advisory services.
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