Revision to Government Regulation 55/2022: No Time Limit for Final Income Tax for Individual MSME Taxpayers

JAKARTA. The government is finalizing amendments to the rules regarding final income tax for Micro, Small, and Medium Enterprise (MSME) taxpayers.

Previously, provisions on MSME income tax were regulated under Government Regulation (PP) No. 55 of 2022.

Under that regulation, MSME taxpayers, those with an annual gross revenue of up to IDR 4.8 billion, are entitled to a final income tax rate of 0.5% of their revenue.

No Time Limit

According to Kompas.com, a key change to be introduced is that the government will remove the time limit for individual MSME taxpayers in using this facility. Previously, individual taxpayers were only allowed to apply the 0.5% final income tax rate for a period of seven years.

This change will override the government’s earlier statement that the MSME tax facility would only be extended until 2027.

Corporate Taxpayers Lose Eligibility for 0.5% Final Income Tax

Meanwhile, the government plans to revoke the 0.5% final tax facility for corporate taxpayers. Under the previous rule, corporate taxpayers in the form of limited partnerships (CV), firms, and village-owned enterprises with annual revenue up to IDR 4.8 billion were eligible for the facility for three years.

The revocation aims to curb tax avoidance practices among corporate taxpayers, particularly the practice of splitting companies (firm splitting) to keep revenue within the MSME threshold.

Revenue Suppression Practices

According to government records, many businesses intentionally hold back their revenue to remain below the IDR 4.8 billion threshold. This phenomenon is known as revenue bunching.

Director General of Taxes Bimo Wijayanto stated that corporate taxpayers will subsequently be required to maintain proper bookkeeping to fulfill their tax obligations. Consequently, their income tax will be calculated using the normal applicable tax rates. (ASP/KEN)