The Directorate General of Taxes (DGT) has confirmed that PTs, CVs, firms, cooperatives, and other corporate entities will no longer be able to apply for or extend the PPh Final 0.5% facility once their eligibility period expires. Businesses currently benefiting from the scheme may continue until the end of their approved utilisation period, but afterwards they must transition to Indonesia’s standard corporate income tax system.
For many companies, particularly growing businesses approaching the end of their eligibility period, this change means stronger bookkeeping requirements and a new approach to tax planning.
What Is the PPh Final 0.5% Scheme?
The PPh Final 0.5% regime was introduced to support small and medium-sized businesses by simplifying tax calculations.
Instead of paying tax based on profit, eligible businesses paid:
0.5% of annual turnover
This system allowed business owners to focus on operations and growth without needing complex accounting calculations during their early years.
Who Could Use It?
Under Government Regulation (PP) No. 55 of 2022, the scheme was available to:
- PT (Limited Liability Companies)
- CV (Limited Partnerships)
- Firms
- Cooperatives
- Village-Owned Enterprises (BUMDes)
- Individual taxpayers
However, eligibility was subject to revenue thresholds and time limits.
Why Is the Government Ending It?
According to the Directorate General of Taxes, the decision was driven by concerns that some companies continued using the facility despite exceeding the intended revenue threshold.
Authorities identified cases where businesses had annual turnover above IDR 4.8 billion but were still benefiting from the reduced tax rate.
The government’s objective is to ensure that the facility remains targeted toward genuinely small businesses while encouraging greater transparency and compliance.
The Main Goals Behind the Change
✓ Improve tax fairness
✓ Strengthen corporate governance
✓ Encourage accurate bookkeeping
✓ Prevent misuse of tax incentives
✓ Increase business transparency
Which Businesses Are Affected?
The policy primarily affects corporate entities that currently rely on the PPh Final regime.
Revenue Threshold
Businesses could only use the scheme if annual turnover remained below:
IDR 4.8 billion per year
If turnover exceeded this amount during a tax year, the company could continue using the facility until year-end but was required to move to the normal tax regime the following year.
Maximum Usage Period
| Business Entity | Maximum Period |
| PT | 3 Tax Years |
| CV and Similar Entities | 4 Tax Years |
Once these periods end, businesses must transition to the standard corporate tax framework.
What Happens After the Facility Ends?
Once a company exits the PPh Final scheme, it must calculate tax under Indonesia’s normal corporate income tax system.
Unlike the final tax regime, taxes will no longer be based on revenue alone.
Instead, companies will need to calculate:
- Revenue
- Operating expenses
- Deductible costs
- Taxable profit
- Corporate income tax payable
This means businesses must maintain proper accounting records and financial statements.
Businesses Should Prepare For:
- Full bookkeeping requirements
- Financial statement preparation
- Corporate tax calculations
- Tax reconciliations
- Stronger internal documentation
- Annual tax compliance obligations
Is This Necessarily Bad News?
Not always. Although the new requirements may seem more complex, many businesses actually benefit from moving to a profit-based tax system as they grow.
Potential Advantages
| Benefit | Why It Matters |
| Tax based on profit | More accurate reflection of business performance |
| Deductible expenses | Operating costs can reduce taxable income |
| Better financial visibility | Supports business planning and growth |
| Improved investor confidence | Financial transparency attracts investors |
| Easier access to funding | Banks often require formal financial reports |
For many businesses, the transition represents a natural progression from the startup stage to a more mature corporate structure.
What About PT, PMA, and Foreign Investors?
For most PT PMA companies, the impact will be limited.
Foreign-owned companies generally already operate under Indonesia’s standard corporate tax system and maintain comprehensive bookkeeping from the outset.
However, investors evaluating acquisitions, partnerships, or new ventures should understand how the changes may affect:
- Business valuations
- Financial projections
- Tax planning strategies
- Due diligence processes
- Regulatory compliance
Understanding Indonesia’s evolving tax framework remains a critical part of doing business successfully in the country.
Stay Updated on Indonesia Tax Regulations with Lets Move Indonesia
Tax regulations in Indonesia continue to evolve, and businesses that stay informed are better equipped to remain compliant and avoid unnecessary risks.
Through our professional consulting services, Lets Move Indonesia assists local businesses, foreign investors, and PT PMA companies with advance Corporate tax advisory and compliance support, helping you navigate the transition with confidence.
