Mechanism of 0.5% MSME Final Income Tax Withholding by Other Parties: Comprehensive Guide and Case Illustrations

In the Indonesian tax ecosystem, the 0.5% Final Income Tax scheme for Micro, Small, and Medium Enterprises (MSMEs) is not only settled through a self-payment mechanism by the Taxpayer. There is another crucial mechanism: withholding or collection by other parties (counterparties). This provision is detailed in Government Regulation (PP) Number 55 of 2022 and its implementing regulation, Minister of Finance Regulation (PMK) Number 164 of 2023.

This article will thoroughly discuss how this withholding mechanism works, who is subject to withholding, and the administrative obligations for the withholding party.

1. Provisions for Final Income Tax Withholding by Other Parties

In general, MSME Taxpayers (both Individuals and Corporate Entities) with a certain gross turnover (not exceeding IDR 4.8 billion a year) are subject to a 0.5% Final Income Tax. This tax payment can be settled in two ways: self-payment or withholding/collection by other parties.

A. When Does Withholding Occur?

Withholding of 0.5% Final Income Tax by other parties occurs when an MSME Taxpayer conducts a transaction for the sale of goods or provision of services with a Tax Withholder or Collector (Pemotong/Pemungut). These Withholders typically include Government Agencies (Government Treasurers), State-Owned Enterprises (BUMN), or private entities designated as tax withholders (e.g., PPh Article 23 withholders).

B. Key Requirements: Certificate (Suket) and Statement Letter

To be eligible for the 0.5% MSME special rate via withholding, the MSME Taxpayer must present supporting documents to the counterparty:

1. Certificate (Surat Keterangan/Suket) PP 55 of 2022: The Taxpayer must apply for a Certificate from the Directorate General of Taxes stating that they are a subject eligible for the 0.5% Final Income Tax. A copy of this letter must be submitted to the tax withholder for every transaction.
2. Statement Letter (Specifically for Individual Taxpayers with Turnover < IDR 500 Million): Individual Taxpayers whose cumulative turnover has not exceeded IDR 500 million must submit a Statement Letter (Surat Pernyataan).
   • If this Statement Letter is submitted, the tax withholder will not perform withholding (0% rate).
   • This statement letter is self-created by the Taxpayer according to the format example in the PMK attachment.

C. Exceptions to Withholding

The tax withholder does not withhold 0.5% Final Income Tax under certain conditions, including:

• Import transactions.
• Purchase of goods or services from an Individual Taxpayer who submits a Statement Letter of turnover under IDR 500 million.
• Transactions with Taxpayers who do not submit a Certificate (in which case the general rates of PPh Article 21, 22, or 23 apply).

2. Case Illustrations

Below are three case illustrations based on the Taxpayer's status and turnover value:

3. Obligations for Tax Withholders

The withholding party plays a crucial role. The following are the obligations that must be fulfilled:

A. Document Verification

• Ensure the validity of the Suket PP 55 through the KSWP system or QR Code scan.
• Receive and archive the Statement Letter for Individual Taxpayers.

B. Calculating, Withholding, and Proof of Tax (Bupot)

The withholder must create a Unified Income Tax Withholding Receipt. This is proof that the MSME's tax has been settled for that transaction.

C. Deposit and Reporting

1. Deposit: No later than the 10th or 15th of the following month.
2. Reporting: Via Unified Periodic Income Tax Return (SPT Masa PPh Unifikasi) no later than the 20th of the following month.

References:

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