The 0.5% Business Tax Is No Longer for Everyone: What PP 20/2026 Changed
For several years, the small-business regime (UMKM) let most companies in Indonesia pay a reduced 0.5% final tax on turnover — simple, predictable, and without full bookkeeping. From April 2026 the rules changed: regulation PP 20/2026 narrowed the group of taxpayers who can use this rate. For owners of ordinary PT companies, including PT PMA, this means moving to a different tax regime.
What changed
PP 20/2026 is an amendment to regulation PP 55/2022 on income tax (PPh). It took effect on 22 April 2026. The key point is simple: the reduced 0.5% turnover rate is no longer available to everyone. Previously almost any small company could use it — now the group of eligible taxpayers is limited.
Who keeps the 0.5% rate
The right to pay 0.5% on turnover remains for three categories, with annual turnover up to Rp 4,800,000,000:
Category | Condition |
Individuals (orang pribadi) | indefinitely, as long as turnover does not exceed 4.8 billion |
PT Perorangan (a company set up by a single person) | indefinitely, as long as turnover does not exceed 4.8 billion |
Cooperatives (koperasi) | no more than 4 tax years |
Previously this benefit was temporary. The time limit has now been removed for individuals and PT Perorangan — the rate applies as long as turnover stays within the threshold.
Who can no longer use the 0.5% rate
The benefit has been lost by ordinary PT companies (perseroan terbatas), including PT PMA (with foreign ownership) and PT PMDN (local), as well as CV, Firma and BUMDes. For these forms the 0.5% turnover regime no longer applies — corporate income tax applies instead.
The 22% rate and the Article 31E reduction
Companies that have lost the benefit move to corporate income tax (PPh Badan). It is calculated not on turnover but on net profit, with a base rate of 22%. A separate relief applies here — Article 31E of the Income Tax Law (UU PPh). If the company's annual turnover does not exceed Rp 50,000,000,000, the rate on part of the profit is reduced by about half — to 11%.
Annual turnover | Rate on net profit |
up to 4.8 billion | 11% on all profit |
from 4.8 to 50 billion | mixed: 11% on part + 22% on the remainder |
above 50 billion | 22% on all profit |
In the middle range, the reduced rate applies to the portion of profit attributable to the first 4.8 billion of turnover; the rest is taxed at 22%.
Mandatory bookkeeping and regular reporting
Moving to profit-based tax changes not only the rate but also the record-keeping requirements. Under the 0.5% regime, tax was calculated on turnover and records could be kept in a simplified way. Under the general regime, PT and CV companies must keep full bookkeeping (pembukuan) — regardless of business size. This requirement is set out in the Law on General Tax Provisions (UU KUP).
What mandatory bookkeeping includes:
Recording of assets, liabilities, capital, income and expenses so that tax can be calculated.
Preparation of financial statements: a balance sheet and a profit and loss statement.
Records in Indonesian, in rupiah, in the Latin alphabet; another language or currency only with the Ministry of Finance's permission.
Keeping documents in Indonesia for 10 years.
Since tax is now calculated on net profit, the quality of the records directly affects the final tax amount.
Regular obligations during the year
Besides the annual return, a company under the general regime takes on monthly obligations:
Income tax instalments (PPh Pasal 25).
Withholding and remitting tax on employee salaries (PPh Pasal 21).
Tax on certain payments — services, rent, dividends and others (PPh Pasal 23/26).
VAT (PPN), if the company is registered as a VAT payer (PKP); registration is mandatory once turnover exceeds 4.8 billion.
Annual corporate income tax return with attached financial statements.
Late filing carries penalties: 1,000,000 rupiah for a company's annual return, and 100,000 to 500,000 rupiah for monthly returns, plus a late-payment surcharge at a rate the Ministry of Finance sets monthly.
What this means for PT PMA and PMDN, and dividend tax
PT PMA and PT PMDN are ordinary PT companies, not PT Perorangan. The 0.5% rate therefore does not apply to them: they pay profit-based tax under the rules above. A separate question is the tax on distributing profit to owners (dividends). The rate depends on who receives the payment:
Owner who is an Indonesian tax resident: 10%, with a possible exemption if the profit is reinvested in Indonesia under set conditions.
Owner who is a non-resident (foreign shareholder): 20% by default; the rate is reduced where there is a tax treaty between Indonesia and the shareholder's country and supporting documents are filed (DGT Form / certificate of residence). In practice this is often 10–15%; the exact figure depends on the country.
Transition period and the ban on splitting
If a company already applies the 0.5% rate and its term has not yet expired, it continues to pay 0.5% until the end of that term under the previous PP 55/2022 rules: up to 3 years for PT companies, and up to 4 years for CV, Firma and BUMDes from the date of registration. After that comes the move to the general regime.
Separately, the regulation closes the business-splitting scheme. The turnover of an individual and of all PT Perorangan companies they have set up is now combined when checking the 4.8 billion threshold. Splitting a business into several companies so each stays under the limit is no longer possible.
What a company owner should do now
Determine your company's form and which regime applies to it after the changes.
If you are on the 0.5% rate, check which year your transition period runs until.
Build the move to profit-based tax into your financial model — 22% with the Article 31E reduction for turnover up to 50 billion.
Set up full bookkeeping and a monthly reporting calendar if you previously kept simplified records.
If you are planning to open a company, choose the form with the new rules in mind.
FAQ
No. A PT PMA is an ordinary PT, and the 0.5% regime does not apply to it. It pays profit-based tax (22% with the Article 31E reduction for turnover up to 50 billion).
No retroactive top-up is required. You complete your term at the 0.5% rate (up to 3 years for a PT), then move to the general regime.
Yes. The duty to keep records and file returns applies to the company itself and does not depend on the level of activity. Even with zero turnover, PT and CV companies file returns.
For PT Perorangan, no. The turnover of all such companies belonging to one owner is now combined.
Not sure which regime applies to your business after the PP 20/2026 changes? Our team will review your situation, help with the move to the general regime, and take on your accounting support.
