MSME Minister Explains Reasons for Removing CV and PT from 0.5 Per Cent Tax Scheme

The Minister of Micro, Small, and Medium Enterprises (MSMEs), Maman Abdurrahman, has revealed the fundamental reasons behind the government’s policy to exclude business entities in the form of CV and non-individual PT from the 0.5 per cent final Income Tax (PPh) scheme. This measure is outlined in the amendment to Government Regulation (PP) Number 20 of 2026.

Maman explained that the decision was made in response to findings of tax incentive abuse by certain large-scale business actors pretending to be MSMEs. “Many are splitting PTs and CVs, creating 10 or 15 different companies, all arranged so that their turnover remains below Rp4.8 billion per year to continue receiving the 0.5 per cent tax incentive facility,” Maman stated during a press conference in Jakarta on Wednesday.

He noted that the practice of splitting business entities creates unfairness within the business ecosystem. Business actors whose capacity already falls into the large-scale category should no longer enjoy facilities specifically reserved for small businesses. “It is unfair; those large businesses with turnovers exceeding Rp4.8 billion should not be enjoying MSME facilities,” he emphasised.

Nevertheless, Maman assured that the government is not increasing the tax burden on genuine MSMEs. The 0.5 per cent final income tax incentive remains applicable to individual-owned PTs and CVs with an annual turnover below Rp4.8 billion.

The Minister added that for non-individual business entities affected by this change, the government will still provide relief in the form of a 50 per cent reduction from the normal 22 per cent tax rate, resulting in an effective rate of 11 per cent. This policy, including both the 0.5 per cent final tax for individuals and the 11 per cent tax discount for certain business entities, is now established as permanent. This aims to provide legal certainty and ensure business sustainability in Indonesia. “This policy aims to create fairness while ensuring that tax incentives are accurately targeted at business actors who truly fall into the MSME category,” Maman concluded.