After the recent changes in Bali restricting the registration of certain KBLI (business classifications), the Ministry of Finance has announced a second major change affecting investors and businesses across Indonesia.
PT PMA companies, SMEs, consultants, developers, freelancers, and other businesses can no longer benefit from the 0.5% scheme previously available to qualifying taxpayers. Those already using the scheme may continue until their approved period ends, but many businesses now need to review their tax structure and compliance requirements.
This article explains what has changed, who remains eligible for the 0.5% tax scheme, and how the new rules may affect businesses operating in Indonesia.
What was the Previous 0.5% Tax Scheme?
Under the previous framework, businesses with annual turnover below IDR 4.8 billion could benefit from a final income tax rate of 0.5% on turnover.
The scheme was available for three years and became popular for its simplicity and relatively low compliance requirements.
Businesses that were already granted access to the scheme may continue using it until the end of their approved period.
What Does the New Tax Scheme Say?
The new rules were introduced through Government Regulation (PP) No. 20 of 2026, which revised the eligibility criteria for the 0.5% Final UMKM tax scheme.
According to the Directorate General of Taxes (DJP), one of the objectives of the regulation is to prevent business fragmentation strategies that were often used to preserve access to the facility.
Under the new rules, only three categories of taxpayers remain eligible for the 0.5% scheme:
- Individual taxpayers (Indonesian citizens)
- PT Perseroan Perorangan
- Cooperatives (limited to four tax years)
As a result, many businesses operating through PT and PT PMA structures will no longer qualify for the scheme.
| Term | Definition |
|---|---|
| DJP (Directorate General of Taxes) | The Indonesian tax authority responsible for administering, collecting, and enforcing national tax regulations. |
| PT Perseroan Perorangan | A simplified single-shareholder limited liability company available only to Indonesian citizens and commonly used by small businesses. |
| PT PMA (Foreign-Owned Company) | An Indonesian limited liability company with foreign ownership that serves as the primary legal vehicle for foreign investment in Indonesia. |
| Business Fragmentation | A tax planning strategy where income or business activities are divided across multiple entities to remain below certain regulatory or tax thresholds. |
What Happens If You No Longer Qualify?
Businesses that are no longer eligible for the 0.5% Final UMKM tax scheme may need to transition to Indonesia’s standard corporate income tax system.
While the standard Corporate Income Tax (CIT) rate remains 22%, certain businesses may still benefit from tax facilities available under Article 31E, which can reduce the effective tax burden on a portion of taxable income for qualifying companies with annual revenue below IDR 50 billion.
This reduced rate starts at 11% on net profit. For companies operating at high profit margins, the change may still represent a significant increase over the previous tax scheme.
If your business used to benefit from the 0.5% tax scheme, you may now have to navigate a new tax structure, additional compliance steps, and a greater need for good bookkeeping and tax planning.
| Term | Definition |
|---|---|
| Corporate Income Tax (CIT) | The standard Indonesian corporate tax imposed on company profits rather than turnover, generally set at 22% before applicable incentives. |
| Article 31E Facility | A corporate tax incentive allowing qualifying companies with annual revenue below certain thresholds to benefit from a reduced income tax rate on part of their taxable income. |
| Taxable Income | The amount of profit remaining after deductible business expenses have been applied and which becomes subject to income tax. |
| Bookkeeping | The systematic recording of financial transactions used to support tax reporting, financial management, and regulatory compliance. |
| Progressive Income Tax | A tax system where tax rates increase as taxable income rises, with Indonesian individual income tax rates reaching up to 35%. |
What Changes for Bookkeeping and Compliance?
Another important consequence of moving to the standard tax system is the increase in compliance requirements.
Businesses benefiting from the 0.5% tax scheme were not required to maintain extensive bookkeeping or audited accounts. As they transition to the standard tax framework, clear bookkeeping and reliable financial records become more important.
A well-structured bookkeeping system aligned with internationally recognized accounting standards can help support transparency, financial management, and ongoing compliance.
How Will Professionals, Influencers, and Freelancers Be Affected?
Previously, some entrepreneurs and developers split income across several companies to stay under the turnover threshold. With the new rules, this approach is now much harder to use.
Consultants, lawyers, and doctors may also find it more difficult to operate multiple PT Perseroan Perorangan entities while providing substantially the same services.
Influencers, vloggers, content creators, and freelancers are likely to be among the most affected groups.
These taxpayers may no longer be eligible for the 0.5% tax scheme and instead become subject to Indonesia’s normal progressive income tax system. Depending on income levels and business structures, tax rates can reach up to 35%.
For professionals and digital entrepreneurs who previously benefited from the 0.5% tax scheme, the change may represent a significant increase in their overall tax burden.
What Should Businesses Do Now?
Businesses affected by PP 20/2026 should evaluate whether their current structure remains the most efficient option under the new rules.
Effective tax planning is now essential for PT PMA companies, SMEs, consultants, developers, freelancers, influencers, and other business owners who relied on the 0.5% tax scheme.
At ILA Global Consulting, we assist clients with tax planning, corporate tax advisory, PT PMA structuring, accounting compliance, and international solutions designed to help businesses legally optimize their tax position while remaining compliant with Indonesian regulations.
Contact ILA Global Consulting for professional tax advice and to discuss how these new rules may affect your tax planning strategy.
Frequently Asked Questions
Under Government Regulation No. 20 of 2026, PT and PT PMA structures are no longer eligible for the 0.5% scheme. The facility is now limited to individual taxpayers who are Indonesian citizens, PT Perseroan Perorangan, and cooperatives for up to four tax years. If your business operates through a PT or PT PMA, you need to review your tax structure now.
Yes, but only until the end of your approved period. Businesses that were already granted access to the scheme may continue using it in the interim. Once that period ends, the new rules apply and you will need to transition to the standard corporate tax framework.
The standard Corporate Income Tax rate of 22% will apply. However, if your company has annual revenue below IDR 50 billion, you may still benefit from a reduced rate starting at 11% on a portion of taxable income under Article 31E. Whether this applies to your business depends on your profit margins and overall tax position.
That approach is now much harder to use. The Directorate General of Taxes (DJP) has explicitly stated that one objective of PP 20/2026 is to prevent business fragmentation strategies used to preserve access to the 0.5% facility. If your current structure relies on splitting income across entities, this needs to be reviewed immediately.
Yes. Under the 0.5% scheme, businesses were not required to maintain extensive bookkeeping or audited accounts. Transitioning to the standard tax system means clear financial records are no longer optional. A well-structured bookkeeping system aligned with recognized accounting standards is now essential for compliance and tax reporting.
You are likely among the most affected groups. If you previously benefited from the 0.5% scheme, you may now be subject to Indonesia’s progressive income tax system. Rates can reach up to 35% depending on your income level and business structure. Reviewing your current setup with a tax advisor before your approved period ends is strongly recommended.
