The government issued the implementing regulation concerning the final tax rate for Micro, Small, and Medium Enterprise (MSME) or UMKM Entrepreneurs. Such regulation is stated in Regulation of Minister of Finance (PMK) Number 164 Year 2023 which has been ratified and officially enacted since 29 December 2023. What are the key rules? Lat’s take a peek at the infographic below.
Imposition of 0.5% Final Income Tax Rate
Not all MSME entrepreneurs are subject to the final income tax rate of 0.5%. Such rate is only imposed on entrepreneurs who have gross turnover above IDR500,000,000 (five hundred million rupiah) up to IDR4,800,000,000 (four point eight billion rupiah) in a year.
MSME entrepreneurs with income under IDR500,000,000 in a year are not subject to tax rules, while entrepreneurs with gross turnover above IDR4,800,000,000 in a year are subject to general provision rates, which means they are not regulated through PMK Number 164 Year 2023.
In general, the provision of the final income tax rate is optional. Entrepreneurs who meet the criteria for the gross circulation range in a year are still allowed to choose if their business wants to be subject to rates in accordance with the general provisions. In addition, the regulation is also only binding within this period.
Entrepreneurs in the form of individuals are subject to the final rate for 7 years, while businesses in the form of Limited Liability Company (PT) are subject to the final rate for 3 years, and businesses in the form of CV, firm, cooperative, Joint Village-Owned Enterprise, Specific Entrepreneurial Individual* are subject to 4 years only.
*OP PT: Specific Entrepreneurial Individual is an Individual Taxpayer who conducts the business activity as a Retailer that has 1 (one) or more business premises. (Source: PER – 32/PJ/2010)
Non-Subject of 0.5% Final Income Tax
- Taxpayer choosing to be subject to the General Provisions of Income Tax
- Corporate Taxpayer obtaining the Income Tax facilities, such as Article 31A of Income Tax Law, PP-94/2010, Article 75/78 of PP-40/2021 (SEZs)
- Permanent Establishment (PE)
- CV or Firm:
- founded by several Individual Taxpayers having the special expertise;
- deliveries of similar services with the services in relation to the free labor
Non-Subject of 0.5% Final Income Tax
- Income from service in relation to Free Labor
- Overseas Income
- Income that has been subject to Final Income Tax with the separate provisions
- Income excluded as a tax object
