Micro, Small and Medium Enterprises (MSMEs) Individual Taxpayers with Gross Circulation of Up to IDR 500 million no Tax collected!

Government Regulation Number 23 the Year 2018 related to income from business received or obtained by domestic Taxpayers having a certain gross turnover, is subject to final Income Tax within a certain period of time. Certain gross income, namely income with a gross turnover not exceeding Rp 4.8 billion in one tax year. This regulation does not explain and mention the existence of non-taxable income limits for MSME’s individual taxpayers. So that regardless of the income earned by MSMEs individual taxpayers, they will be subject to a Final Income rate of 0.5% every month with a maximum period of 7 years in accordance with the rules for using Government regulation Number 23 that MSMEs individual taxpayers can only use Government Regulation Number 23 the year 2018 for 7 years.

However, with the new law related to taxation, namely the Law on the Harmonization of Tax Regulations (UU HPP), which was ratified by the Government in 2021. Where in Article 7 paragraph 2a of the Law on the Harmonization of Tax Regulations (HPP) there is a policy that states the existence of Non-Taxable Income (PTKP) for MSMEs Individual Taxpayers. This PTKP is not only for individual taxpayers, but MSME Individual taxpayers also get a PTKP of Rp 500 million in one year, so that MSME Individual Taxpayers’ income is still less or equal to Rp 500 million in a year, there is no need to pay Final Income tax rate of 0.5 %. This policy is effective as of 2022. This is support from the Government for MSME actors to be able to maximize their business.

How to apply PTKP for this MSME Individual taxpayers?

Since the enactment of this Harmonization of Tax Regulations (HPP Law), namely in 2022, there has been an adjustment to the calculation of the MSME Final Income Tax for Individual taxpayers, namely, MSME actors must calculate and know if their turnover has exceeded Rp. 500 million in 1 year or not, because the turnover has exceeded Rp. 500 million in a year. At that time, the MSME Final Income Tax rate will be charged. However, if in 1 year the turnover does not reach Rp 500 million, the turnover is not subject to MSME Final Income Tax. The following is an example of calculating MSME Final income Tax in the HPP Law

Illustration of Mr. Made’s Tax Calculation as a Grocery Store Entrepreneur in 2022 Fiscal

No Month Gross Income Cumulative Gross Income Taxable Gross Income Final Income Tax (UU HPP) Final Income Tax (before UU HPP applied)
1 Januari 100.000.000 100.000.000 0 0 500.000
2 Februari 100.000.000 200.000.000 0 0 500.000
3 Maret 100.000.000 300.000.000 0 0 500.000
4 April 100.000.000 400.000.000 0 0 500.000
5 Mei 100.000.000 500.000.000 0 0 500.000
6 Juni 100.000.000 600.000.000 100.000.000 500.000 500.000
7 Juli 100.000.000 700.000.000 100.000.000 500.000 500.000
8 Agustus 100.000.000 800.000.000 100.000.000 500.000 500.000
9 September 100.000.000 900.000.000 100.000.000 500.000 500.000
10 Oktober  100.000.000 1.000.000.000 100.000.000 500.000 500.000
11 November 100.000.000 1.100.000.000 100.000.000 500.000 500.000
12 Desember 100.000.000 1.200.000.000 100.000.000 500.000 500.000
Total 1.200.000.000 700.000.000 3.500.000 6.000.000

NB: during the month of May, Mr. Made’s cumulative business turnover has reached Rp. 500 million, therefore after May any business turnover has begun to be subject to Final Income Tax at a rate of 0.5%

So that it can be concluded in the calculation above, it can be seen how much Final Income Tax is owed by Mr. Made before and after the enactment of the HPP Law. Prior to the enactment of the HPP Law, Mr. Made had a tax owed of Rp. 6 million in 1 year and after the enactment of the HPP Law, Mr. Made had a. tax of Rp. 3.5 million in 1 year so with the latest regulations in the HPP Law related to PP 23 this tax Mr. Made’s outstanding debt was reduced by Rp. 2.5 million.

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