Maman Abdurrahman Emphasizes that the Final UMKM Tax Rate Will Not Change

Minister of MSME Maman Abdurrahman. (Photo: ANTARA)

JAKARTA - Minister of Micro, Small and Medium Enterprises (UMKM) Maman Abdurrahman emphasized that the final income tax (PPh) rate for MSMEs remains at 0.5 percent and has not increased as stipulated in Government Regulation (PP) Number 20 of 2026 which was enacted on April 22, 2026 as an improvement on PP Number 55 of 2022.

"For MSMEs, there is no change or increase in taxes. The tax incentive for MSMEs remains at 0.5 percent. The difference is that, if previously there was a time limit for using the facility, it is no longer limited," said Maman, Wednesday, May 3.

PP Number 20 of 2026 stipulates that the final tax facility of 0.5 percent is given to the Personal Taxpayer (WP), Limited Company (PT) Individuals, and cooperatives that are at least four tax years old with a maximum turnover of Rp. 4.8 billion per year.

In the previous regulation, namely PP Number 55 of 2022, the final tax facility for MSMEs can also be used by CVs, firms, non-individual PTs, and Village Owned Business Entities (BUMDes).

However, according to Maman, this provision in practice is often abused by certain parties who divide businesses into several small businesses to obtain tax facilities that should be allocated to MSMEs.

"Learning from experience, many parties take advantage of this rule even though they are not entitled to use the Final UMKM Tax rate. Companies are often broken up into dozens of small CVs and PTs so that they can continue to enjoy tax incentives. This is not fair. Businesses with large sales should not enjoy facilities intended for MSMEs with sales below IDR 4.8 billion," he said.

Through the new provision, the UMKM Final Tax Facility of 0.5 percent is prioritized for business actors who truly meet the criteria of UMKM.

Meanwhile, CVs, firms, non-individual PTs, and BUMDes will be subject to the normal tax rate of 22 percent.

However, continued Maman, the government provides a transition period for business entities that are currently still utilizing the UMKM Final Tax Facility based on old provisions.

They can still use the 0.5 percent tariff until the validity of the facility ends according to the previous applicable provisions.

"The transition room will remain open so that there is time to make administrative adjustments. The government does not immediately impose new rules without giving all parties the opportunity to prepare. Regarding the implementation of the transition period, this is the authority of the Directorate General of Taxes," said Maman.

Furthermore, Minister Maman explained that business entities such as CVs, firms, and non-individual PTs with a turnover of less than IDR 4.8 billion still receive tax relief in the form of a 50 percent reduction in the normal tariff so that they only pay 11 percent of income tax.

In addition, the government also continues to provide protection for micro and small businesses run by Individual Taxpayers with a turnover of up to IDR 500 million per year are not subject to tax or apply an effective tariff of 0 percent.

Maman added that one of the important breakthroughs in PP Number 20 of 2026 is the provision of long-term certainty for MSMEs.

Previously, the Final Tax Rate of 0.5 percent could only be used within a certain period of time, now the facility can be used continuously as long as the requirements are still met.

Previously, PP Number 55 of 2022 limited the use of the Final Tax Rate of 0.5 percent for seven years from the date the taxpayer was registered.

Through the new regulation, the time limit is removed to provide stronger business certainty for MSMEs.

"The President's instructions are very clear, namely to provide permanent tax facilities so that MSMEs have certainty and guarantees for business sustainability in the long term," said Maman.

In addition to encouraging tax justice, PP Number 20 of 2026 strengthens the governance of healthy and ethical business.

This regulation states that all expenses derived from illegal acts, including bribes, gratuities, and corruption, cannot be used as a reduction of gross income in tax calculations.

Maman emphasized that the Ministry of MSME would continue to monitor the implementation of PP Number 20 of 2026 through various education, assistance, and business capacity improvement programs, especially in the aspects of bookkeeping and tax administration.

"The government will continue to accompany MSMEs so that they are able to carry out their tax obligations properly while taking advantage of the various facilities that have been provided. If there are obstacles, the public can submit complaints through the Directorate General of Taxes channel or through the SAPA UMKM platform that we are preparing," said Maman.