RRI.CO.ID, Jakarta - Indonesia’s government has confirmed that the final income tax rate for micro, small, and medium-sized enterprises (MSMEs) will remain at 0.5 percent under a newly issued regulation. Officials say the policy is designed to provide long-term certainty for genuine small businesses while preventing misuse of tax incentives by larger companies.

Based on the release received by RRI Voi Friday, June 4, 2026, Minister of MSMEs, Maman Abdurrahman, said there is no increase in taxes for eligible MSMEs under Government Regulation No. 20 of 2026, which was issued on April 22 as an update to the previous regulatory framework. He emphasized that the incentive remains unchanged and continues to support small business growth.

“For MSMEs, there is no change or increase in taxation. The tax incentive remains at 0.5 percent. The difference is that while previously there was a time limit on the use of this facility, it is now no longer restricted,” Maman said in Jakarta on Wednesday.

Under the new regulation, the 0.5 percent final income tax applies to individual taxpayers, individual limited liability companies, and cooperatives that have operated for no more than four tax years and generate annual revenue of up to Rp4.8 billion. The government says the policy is aimed at ensuring that tax benefits are directed toward businesses that genuinely meet MSME criteria.

Maman explained that previous regulations allowed other business entities, including partnerships, non-individual limited companies, and village-owned enterprises, to access the incentive. However, authorities found that some larger businesses were restructuring into multiple smaller entities to continue benefiting from a tax facility intended for small enterprises.

“Many parties took advantage of this regulation despite not being entitled to the MSME tax rate. Companies were often split into dozens of smaller entities in order to continue enjoying tax incentives. This is not fair,” he said.

Under the revised rules, business entities such as partnerships, firms, non-individual limited companies, and village-owned enterprises will be subject to the standard corporate income tax rate of 22 percent. However, businesses with annual revenue below Rp4.8 billion will still receive a 50 percent reduction from the normal rate, resulting in an effective tax rate of 11 percent.

The regulation also maintains protection for individual micro and small business owners earning up to Rp500 million annually, who remain exempt from income tax. In addition, the government has introduced a transition period allowing businesses currently using the old scheme to continue benefiting from the 0.5 percent rate until their existing eligibility period expires.

According to him, the most significant reform is the removal of the previous time limit on the 0.5 percent tax incentive, which had been capped at seven years. He said the change provides long-term business certainty and reflects the government’s commitment to creating a fairer, more sustainable tax system while continuing to support the growth of Indonesia’s MSME sector.