Until recently, most small companies in Indonesia could use the preferential UMKM tax regime and pay just 0.5% of turnover. This system was convenient: it did not require full accounting, and the tax was calculated simply and predictably.
On 22 April 2026, Regulation PP 20/2026 came into force, significantly limiting the range of companies eligible for this tax benefit. For most standard PT companies, including PT PMA and PT PMDN, this means moving to the general tax regime.
Who can still pay 0.5% of turnover
The reduced rate remains available only for annual turnover of up to Rp 4.8 billion for the following categories:
- Individuals (orang pribadi) — with no time limit, as long as turnover does not exceed the set threshold.
- PT Perorangan (a company established by a single owner) — also with no time limit, provided the threshold is met.
- Cooperatives (koperasi) — for no more than four tax years.
The main change is that the time limit has been removed for individuals and PT Perorangan: they can use the rate for as long as their turnover allows.
Who has lost the preferential regime
The right to pay 0.5% tax on turnover no longer applies to:
- PT PMA;
- PT PMDN;
- CV;
- Firma;
- BUMDes.
These companies must now calculate tax based on net profit rather than revenue.
How tax is now calculated
The standard corporate income tax rate (PPh Badan) is 22%.
However, companies with annual turnover of up to Rp 50 billion can use the relief under Article 31E of the Income Tax Law, which reduces the tax to 11% on part of their profit.
As a result, the following system applies:
- up to Rp 4.8 billion in turnover — effectively 11% on all profit;
- from Rp 4.8 billion to Rp 50 billion — part of the profit is taxed at 11%, and the remainder at 22%;
- over Rp 50 billion — 22% on all profit.
Full accounting becomes mandatory
Moving to the general regime means not only a change in the tax rate, but also new requirements for running a business.
Companies must:
- keep full accounting records;
- record assets, liabilities, income and expenses;
- prepare a balance sheet and profit and loss statement;
- keep documentation in Indonesian and in rupiah, unless they have special permission;
- store accounting documents in Indonesia for at least 10 years.
The amount of tax assessed now depends directly on the quality of the accounting records.
New regular obligations
In addition to annual reporting, companies must meet their monthly tax obligations on time, including:
- advance corporate income tax payments (PPh Pasal 25);
- withholding employee income tax (PPh Pasal 21);
- taxes on certain payments (PPh Pasal 23/26);
- VAT (PPN) reporting and payment if the company has PKP status, which is mandatory for turnover above Rp 4.8 billion.
Late filing of tax returns is subject to fines, and late payment results in interest penalties.
What PT PMA owners need to know
PT PMA and PT PMDN are classified as standard PT companies, so the preferential 0.5% regime no longer applies to them.
Dividend payments also create an additional tax liability:
- 10% — for Indonesian tax residents, with a possible exemption if reinvestment conditions are met;
- 20% — for foreign shareholders, unless an international tax treaty provides for a lower rate. Where a treaty applies, the rate is often reduced to 10–15%.
The transition period remains in place
Companies that were already using the 0.5% regime will be able to continue using it until the end of the previously established period:
- PT — for up to three years from the date of registration;
- CV, Firma and BUMDes — for up to four years.
Once the transition period ends, moving to the general regime will become mandatory.
In addition, the new rules prohibit artificially splitting a business between several PT Perorangan. When checking the Rp 4.8 billion threshold, the combined turnover of the individual and all companies owned by them is now taken into account.
What you should do now
- Check which tax regime applies to your company.
- Confirm whether a transition period applies and when it ends.
- Recalculate your financial model based on income tax instead of turnover tax.
- Set up full accounting and a regular reporting system.
- When registering a new business, choose the legal structure in advance with the updated rules in mind.
The changes will affect most companies registered as PT, so business owners should assess in advance how the new rules will affect their tax burden, accounting and financial planning.
If you still have questions about company registration, the tax regime or running a business in Indonesia, the Legal Indonesia team will help you understand the current requirements and choose the best solution for your situation.
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