Changes to 0.5% MSME Tax Rate Rules: Full Details Revealed

The government has officially issued new provisions for Final Income Tax (PPh Final) through Government Regulation (PP) Number 20 of 2026. Under this new policy, the turnover of certain families and sole proprietorships will be combined to determine the Rp4.8 billion annual threshold. This measure aims to prevent taxpayers from splitting their businesses into multiple entities to continue enjoying the 0.5% Final PPh rate, a practice previously noted by Finance Minister Purbaya Yudhi Sadewa.

In addition, income from services related to independent professions will no longer be eligible for the MSME Final PPh facility under PP 20/2026, Article 56, paragraphs (3)a and (4). The government has explicitly categorised various professions as independent work, including:

1. Experts such as lawyers, accountants, architects, doctors, consultants, notaries, land deed officials, appraisers, and actuaries;

2. Entertainers including musicians, presenters, singers, comedians, film and soap opera stars, advertising stars, directors, film crews, models, dancers, sculptors, painters, and digital content creators (influencers, selebgrams, bloggers, vloggers, etc.);

3. Athletes;

4. Advisors, teachers, trainers, instructors, moderators, and similar professions;

5. Authors, researchers, translators, and similar professions;

6. Advertising agents;

7. Project supervisors or managers;

8. Intermediaries or customer finders;

9. Sales agents;

10. Insurance agents; and

11. Distributors for multi-level marketing or direct selling companies and similar activities.

As the MSME Final PPh no longer applies to these professions, they are required to use the general Income Tax mechanism. Regarding sole proprietorships, Article 57(2)b states that sole proprietorships established by individuals with specialised expertise providing services similar to independent work cannot use the MSME Final PPh.

The government also regulates the aggregation of taxpayer turnover to determine the application of Final PPh. Under Article 57(1), the gross turnover of taxpayers must be assessed collectively. Furthermore, Article 57(2)e stipulates that the combined gross income of an individual taxpayer and all sole proprietorships established by that individual must not exceed Rp4.8 billion within a tax year. This gross turnover includes all income from business and independent services, whether subject to final or non-final tax, including income earned abroad.

The government appears serious about preventing business fragmentation, even between spouses. Article 58, paragraphs (2) and (3) emphasises that the gross turnover of husbands and wives must be combined under certain conditions, including with any sole proprietorships established by either party.

Despite these changes, the government maintains the 0.5% MSME Final PPh scheme for eligible businesses with a turnover threshold of Rp4.8 billion per year. A transition period is also provided under Article II, allowing taxpayers meeting the criteria to continue using the MSME Final PPh facility until the 2026 Tax Year.