0.5 Per Cent MSME Tax Made Permanent, Corporate Entities Subject to New Scheme

The government has ensured that the final Income Tax (PPh) rate of 0.5 per cent for micro, small, and medium enterprise (MSME) actors is now permanent through an amendment to Government Regulation (PP) Number 20 of 2026. The Minister of Micro, Small, and Medium Enterprises (MSMEs), Maman Abdurrahman, stated that this policy was implemented to provide certainty for business actors after previous incentives were only extended periodically.

“The only difference is that previously, extensions were limited to one-year periods; now, it is open for as many years as needed in the future, so it is no longer restricted,” Maman said during a press conference in Jakarta on Wednesday (3/6/2026).

He added that there are no changes or increases to the tax rate for MSMEs. Business actors with an annual turnover below Rp500 million will still be subject to a 0 per cent tax rate, while those with turnover up to Rp4.8 billion will be subject to the 0.5 per cent final rate.

According to Maman, this permanent policy follows a directive from the President to ensure MSME actors have business certainty and are no longer shadowed by regulatory uncertainty. However, the government continues to make adjustments to ensure that incentives are accurately targeted. Maman noted that evaluations over recent years revealed practices of abuse by large businesses, such as the splitting of business entities to qualify for the 0.5 per cent final PPh facility. Consequently, the 0.5 per cent final PPh rate will remain available to individual business actors with turnover below Rp4.8 billion, whereas non-individual business entities, such as Limited Liability Companies (PT) and Limited Partnerships (CV), will have their taxes calculated based on net profit.