The Indonesian Government has officially issued Government Regulation (PP) No. 20 of 2026, amending the provisions governing the 0.5% Final Income Tax (PPh Final) facility for Micro, Small, and Medium Enterprises (MSMEs). Through this new regulation, the government has narrowed the categories of taxpayers eligible to benefit from the preferential tax scheme.

What Has Changed?

Before the enactment of PP 20 of 2026, the 0.5% Final Income Tax facility was available to various business entities with annual gross revenue of up to IDR 4.8 billion, including:

• Individual Taxpayers
• Cooperatives
• Limited Partnerships (CV)
• Firms
• Limited Liability Companies (PT)
• Village-Owned Enterprises (BUMDes)

Under the new regulation, however, the facility is now limited to:

• Individual Taxpayers
• Sole-Shareholder Limited Liability Companies (PT Perorangan)
• Cooperatives

provided that their annual gross revenue does not exceed IDR 4.8 billion.

Which Businesses Are No Longer Eligible?

PP 20 of 2026 stipulates that the following business entities are no longer eligible to obtain the 0.5% Final Income Tax facility as new beneficiaries:

• Village-Owned Enterprises (BUMDes)
• Limited Liability Companies (PT), except Sole-Shareholder PTs
• Firms
• Limited Partnerships (CV)

This change is particularly important for businesses that have relied on the MSME final tax scheme as part of their tax compliance strategy.

What About Existing Beneficiaries?

The government has provided a transitional period for taxpayers who are currently utilizing the 0.5% Final Income Tax rate.

CVs, Firms, PTs, and BUMDes that have already been granted the facility may continue to apply the 0.5% rate until the end of their previously approved eligibility period.

Therefore, the regulation does not immediately terminate existing tax facilities but instead limits future eligibility under the revised criteria.

Independent Professionals Are Excluded

PP 20 of 2026 also clarifies that independent professional services are not eligible to use the MSME Final Income Tax scheme.

Examples of professions that fall under this category include:

• Doctors
• Consultants
• Lawyers
• Accountants
• Notaries
• Influencers
• Insurance Agents
• Other similar professional occupations

This provision reinforces the distinction between MSME business activities and independent professional services, which are subject to different tax treatments.

Why Was the Regulation Revised?

According to the government, the policy change aims to:

1. Ensure that tax incentives are more accurately targeted.
2. Prevent the misuse of MSME tax facilities.
3. Promote healthier and more sustainable business practices.

Conclusion

Government Regulation No. 20 of 2026 introduces significant changes to the eligibility criteria for the 0.5% Final Income Tax facility. While the facility was previously available to a broad range of business entities, it is now restricted to Individual Taxpayers, Sole-Shareholder Limited Liability Companies (PT Perorangan), and Cooperatives. Businesses should carefully review their legal structure and tax position to ensure compliance with the updated regulations. Proper tax planning will be essential for adapting to these changes and maintaining effective tax management going forward.