Comprehensive Guide to 0.5% Final Income Tax for MSMEs: Latest Regulations and Calculation Methods

The Indonesian government continues to support the growth of Micro, Small, and Medium Enterprises (MSMEs) through fiscal policy reforms that alleviate the administrative and financial burdens on business actors. The current primary legal basis is Government Regulation (PP) Number 55 of 2022 concerning Adjustments to Income Tax Regulations, which serves as a derivative regulation of the Harmonization of Tax Regulations Law (UU HPP). The technical implementation rules are further clarified through Minister of Finance Regulation (PMK) Number 164 of 2023.

This article will thoroughly explore the provisions of the 0.5% Final Income Tax (PPh Final) for MSMEs, ranging from eligible subjects, exceptions, time limits for utilization, to calculation simulations.

1. Parties Eligible to Utilize 0.5% Final Income Tax (Tax Subjects)

Based on PP 55 of 2022 and PMK 164 of 2023, domestic Taxpayers (WP) who have a certain gross turnover—not exceeding IDR 4.8 billion in one Tax Year—can utilize the 0.5% Final Income Tax scheme.

The parties or tax subjects entitled to utilize this rate include:

1. Individual Taxpayers.
2. Corporate Taxpayers, in the form of:
   • Cooperatives (Koperasi);
   • Limited Partnerships (CV);
   • Firms (Firma);
   • Limited Liability Companies (PT), including Individual Limited Liability Companies (Perseroan Perorangan) established by one person; and
   • Village-Owned Enterprises (BUMDes) or Joint Village-Owned Enterprises (BUMDesma).

The key eligibility criterion is that the total gross turnover from all outlets (both central and branches) accumulated in one tax year must not exceed the threshold of IDR 4.8 billion. If the cumulative turnover of a husband and wife is combined due to separate property (PH) or separate tax obligation (MT) status, the IDR 4.8 billion limit applies to their combined turnover.

2. Exceptions to the Utilization of Final Income Tax

Not all income or Taxpayers with a turnover under IDR 4.8 billion can automatically use the 0.5% rate. There are exceptions regarding both tax subjects and tax objects.

Tax Subject Exceptions

The following Taxpayers cannot utilize the 0.5% Final Income Tax even if their turnover is under IDR 4.8 billion:

• Taxpayers who explicitly choose to be subject to Income Tax based on general provisions (Article 17 rates of the Income Tax Law). This must be submitted via a notification to the Directorate General of Taxes.
• Corporate Taxpayers receiving Income Tax facilities based on Article 31A of the Income Tax Law, PP 94 of 2010, or Special Economic Zone (KEK) facilities.
• Permanent Establishments (BUT).
• Corporate Taxpayers in the form of CVs or Firms formed by several Individual Taxpayers possessing special expertise and providing services similar to services related to freelance professions (e.g., law firms or public accounting firms).

Tax Object Exceptions

The following incomes cannot be calculated using the 0.5% Final Income Tax rate:

• Income received by Individual Taxpayers from services related to free work (pekerjaan bebas) such as lawyers, accountants, doctors, architects, athletes, teachers, insurance agents, and intermediaries.
• Income received or obtained abroad where tax is owed or has been paid abroad.
• Income that has been subject to Final Income Tax under separate provisions (e.g., construction services or land/building rental).
• Income excluded as a tax object.

3. Basis of Tax Imposition for MSMEs

The Tax Base (DPP) used to calculate the MSME Final Income Tax is the amount of gross turnover (omzet) from business income each month.

Gross turnover is defined as consideration or value in the form of money or monetary value received or obtained from business, before deducting sales discounts, cash discounts, and/or similar deductions.

Non-Taxable Turnover Facility for Individuals

One of the most significant changes in the latest regulations (UU HPP and PP 55/2022) is the "Non-Taxable Turnover" facility for Individual Taxpayers.

Individual Taxpayers with certain gross turnover are not subject to Income Tax on the portion of gross turnover up to IDR 500,000,000.00 in 1 (one) Tax Year.

This means the 0.5% Final Income Tax is only paid by Individual Taxpayers once their accumulated turnover in the current year exceeds IDR 500 million. This facility does not apply to Corporate Taxpayers (CV, PT, Cooperatives); they must pay 0.5% from the first month regardless of the amount.

4. Time Limits for Utilizing Final Income Tax

The utilization of the 0.5% rate has specific time limits to serve as a learning period for bookkeeping:

1. 7 Tax Years for Individual Taxpayers.
2. 4 Tax Years for Cooperatives, CVs, Firms, BUMDes, or Individual PTs.
3. 3 Tax Years for Limited Liability Companies (PT).

How is the start of this period calculated?

• Registered after PP 55/2022: Calculated from the Tax Year registered.
• BUMDes/Individual PT registered before: Starting from Tax Year 2022.
• Old Taxpayers (PP 23/2018): Continues the remaining validity period.

5. MSME Tax Calculation and Case Illustrations

A. Individual Taxpayer Case (With IDR 500 Million Facility)

Illustration: Mr. R (electronics trader) registered in January 2024.

• January - May: Cumulative turnover IDR 500,000,000 → Tax Payable IDR 0 (Nil).
• June: Turnover IDR 120,000,000 → 0.5% x 120,000,000 = IDR 600,000.
• July: Turnover IDR 80,000,000 → 0.5% x 80,000,000 = IDR 400,000.

B. Corporate Taxpayer Case (CV/PT)

Illustration: CV Maju Jaya, turnover August 2024 IDR 200,000,000.

Tax Payable = 0.5% x IDR 200,000,000 = IDR 1,000,000 (No deduction facility).

C. Withholding by Other Parties

MSMEs can submit a Certificate (Surat Keterangan) so that 0.5% is withheld instead of standard rates.

Individual Taxpayers under the 500 million limit can submit a Statement Letter to avoid withholding (0% rate). If later proven to exceed the limit, sanctions apply.

References:

1. Law Number 7 of 2021 (UU HPP).
2. Government Regulation (PP) Number 55 of 2022.
3. Minister of Finance Regulation (PMK) Number 164 of 2023.