MSME Tax Transformation: A Comprehensive Guide to Switching from Final Income Tax to General Rate in the Coretax Era

Micro, Small, and Medium Enterprises (MSMEs) in Indonesia have long enjoyed tax simplicity through the 0.5% Final Income Tax (PPh Final) scheme regulated in Government Regulation Number 55 of 2022. However, this facility is time-bound. MSME Taxpayers must prepare to "grade up" and switch to using the general Income Tax (PPh) rate based on net profit.

This transition is often daunting due to fears of administrative complexity. However, with the implementation of the Coretax System in 2025, this process has become more integrated and automated. This article will discuss the procedures for switching schemes and provide in-depth case illustrations.

1. Understanding the Time Limits of the MSME Final Tax Facility

The use of the 0.5% Final Tax rate is temporary. Based on PP 55 of 2022, the validity periods are:

• 7 (seven) Tax Years for Individual Taxpayers.
• 4 (four) Tax Years for Cooperatives, Limited Partnerships (CV), Firms, or Individual Companies.
• 3 (three) Tax Years for Limited Liability Companies (PT).

If this period expires, or if turnover exceeds IDR 4.8 billion, the Taxpayer is obliged to switch to the general rate starting the following tax year.

2. Procedure for Switching Schemes in the Coretax System

A. Obligation to Maintain Bookkeeping

The absolute requirement for switching is maintaining Bookkeeping (Pembukuan). In Coretax, Corporate Taxpayers will default to the Accrual Basis method. Individuals must also switch from simple recording to structured bookkeeping.

B. Notification and Rate Selection in Annual SPT

1. Access SPT Module: Log in to Coretax and create a draft for Annual SPT.
2. Identification (Section B & C): Ensure business income is no longer categorized as an MSME Final Tax object.
3. Rate Selection (Section D): Corporations with turnover < IDR 50 Billion should select "Facility Rate as per Article 31E", which offers a 50% discount (effective rate of 11%).
4. Financial Attachments: Fill out Attachment L1 (Financial Statement Reconciliation) using Coretax’s standardized formats.

C. Article 25 Income Tax Installments

Switching triggers the obligation for monthly tax installments. Coretax calculates this automatically in Attachment 6 based on your reported net income.

3. Case Illustration: Transition of CV. Maju Bersama

4. Conclusion

Transitioning to the General Rate is a strategic step towards transparency. The Article 31E facility provides significant relief. With Coretax, the complexity of bookkeeping and installments is simplified through prepopulated data and automated validation, ensuring a smooth "grade up" for your business.

References: Government Regulation Number 55 of 2022, Income Tax Law (UU HPP), and DGT Regulation PER-8/PJ/2025.