0.5% Final Tax Rate No Longer Available for PT and CV

For business owners operating as a Limited Liability Company (PT) or Limited Partnership (CV) that have been utilizing the 0.5% Final Income Tax (PPh Final UMKM) rate, an important regulatory change has taken effect. Under Government Regulation (PP) No. 20 of 2026, enacted on April 22, 2026, newly registered PT and CV entities are no longer eligible for the 0.5% Final Income Tax rate available to MSMEs (Micro, Small, and Medium Enterprises). Below is a detailed explanation of the new provisions and their implications for business taxpayers.

The standard Corporate Income Tax (CIT) rate in Indonesia is generally known to be 22% of net profit. However, Micro, Small, and Medium Enterprises (MSMEs) have been eligible for a special tax incentive in the form of a 0.5% Final Income Tax, calculated based on gross revenue (turnover) rather than net profit, as stipulated under Government Regulation (PP) No. 55 of 2022. Previously, this incentive was available to various types of business entities, including Limited Liability Companies (PT), Limited Partnerships (CV), firms, and Village-Owned Enterprises (BUMDes/BUMDesma), subject to specific eligibility periods.

Through Government Regulation (PP) No. 20 of 2026, these provisions have been tightened. The following taxpayers remain eligible to apply the 0.5% Final Income Tax rate:

• Individual taxpayers (including freelancers, sole proprietors, small traders, and similar businesses) remain eligible for the 0.5% Final Income Tax facility. They may benefit from this incentive without time limitation, provided that their annual gross revenue does not exceed IDR 4.8 billion.
  
• Individual Limited Liability Companies (PT Perorangan) remain eligible for the 0.5% Final Income Tax incentive, subject to certain requirements.
  
• Coops remain eligible for the 0.5% Final Income Tax incentive, subject to a specified eligibility period.
  

Meanwhile, newly registered Limited Liability Companies (PT), Limited Partnerships (CV), firms, and Village-Owned Enterprises (BUMDes/BUMDesma) are no longer eligible for the 0.5% Final Income Tax incentive. These business entities must immediately apply the standard Corporate Income Tax scheme, which is calculated based on net profit rather than gross revenue (turnover).

What About PT and CV Businesses Currently Using the 0.5% Final Income Tax Incentive?

For PT or CV entities that had already been utilizing the 0.5% Final Income Tax (PPh Final UMKM) incentive before Government Regulation (PP) No. 20 of 2026 came into effect, the incentive is not revoked immediately. A transitional period applies: as long as the remaining eligibility period has not expired and the entity's annual gross revenue does not exceed IDR 4.8 billion, it may continue to apply the 0.5% Final Income Tax rate until its eligibility period officially ends.

The entities directly affected by this regulatory change are newly established PT and CV businesses registered after the regulation takes effect. These business entities will no longer be eligible to apply the 0.5% Final Income Tax rate and must immediately adopt the standard Corporate Income Tax scheme.

This policy change is based on reasonable considerations. The 0.5% Final Income Tax incentive was originally introduced to support MSMEs that had not yet implemented adequate bookkeeping and accounting systems. Over time, however, concerns arose that the incentive was being utilized by business entities that had already grown and become well established, rather than by genuine MSMEs that truly needed the support. As a result, the government has narrowed the scope of eligible taxpayers while encouraging businesses to adopt proper bookkeeping practices and improve financial transparency.

Right Now Consulting is tax consultant in Bali who is focusing to help individuals and businesses with their Accounting and Taxation matters. Right Now Consulting provides accounting / bookkeeping, tax consultant / taxation, and company formation / incorporation / setup services (CV / PT / PT PMA).