GOVERNMENT REGULATION NO. 23/2018 – NEW REDUCED INCOME TAX RATE FOR SMEs

The corporate income tax for small medium enterprises (SMEs) in Indonesia has been reduced from 1% to 0.5% according to the newly issued government regulation No. 23/2018 (PP No. 23 Tahun 2018).

The annual gross income threshold for the taxpayers remains unchanged, that is IDR 4.8 billion. If taxpayers have exceeded the gross income threshold during the current year, they must apply the general tax rates based on Article 17 or Article 31E of the Income Tax Law for the following year.

Individuals can use the new income tax rate for seven years, cooperative and firm for four years, and three years for limited liabilities company. After taxpayers reach the limitation periods, they must apply the general tax rates based on Article 17 or Article 31E of the Income Tax Law for the following year as well. The limitations period starts from the 2018 tax year for taxpayers registered prior to 1 July 2018 or the tax year when the taxpayer is registered for those registered after 1 July 2018.

Using general tax rates means having a bookkeeping system in place for financial reports. So, by issuing the new Government Regulation No. 23/2018, it is expected that taxpayers will be familiar with tax compliance and have enough time to prepare a proper bookkeeping system.

 

Ref: Government Regulation No. 23/2018 (PP No. 23 Tahun 2018)

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