MSME Minister Asserts No Tax Increases for Small Businesses

There will be no changes or increases in taxes for MSMEs within the amendments to Government Regulation (PP) Number 20 of 2026.

“There is no change or even an increase in taxes for MSMEs. Therefore, tax incentives for MSMEs remain the same as before,” Maman stated during a press conference at his office in Jakarta on Wednesday.

He explained that MSME players with an annual turnover of below IDR 500 million will continue to be subject to a 0 per cent tax rate. Meanwhile, MSMEs with an annual turnover of up to IDR 4.8 billion will remain subject to a final tax rate of 0.5 per cent of turnover.

According to Maman, the change in the latest regulation lies solely in the duration of the final tax rate, which is no longer limited. Previously, the 0.5 per cent tax rate was subject to annual extensions; however, the policy is now permanent. “Previously, it was extended annually; now, it is not limited. This is to provide certainty for MSME players,” he said.

Nevertheless, the government is making adjustments to prevent the misuse of the 0.5 per cent final income tax facility for MSMEs. Maman noted that evaluations over recent years revealed practices of splitting business entities to ensure they remain within the MSME category to enjoy the 0.5 per cent final tax rate.

To address this, the government will maintain the 0.5 per cent final tax rate for individual entrepreneurs with a turnover below IDR 4.8 billion per year. For non-individual business entities, such as PT and CV, taxation will be based on net profit. However, Maman emphasised that non-individual business entities (PT and CV) with a turnover below IDR 4.8 billion will still receive an incentive in the form of a 50 per cent reduction from the normal tax rate of 22 per cent.

“This incentive is intended for those with a turnover below IDR 4.8 billion. If it is above IDR 4.8 billion, it must be fair; they should not receive the same treatment,” he added.

With the policy now being permanent, the government hopes that MSME players will have business certainty and can continue to grow without being burdened by regulatory uncertainty.