The Indonesian government has issued the latest MSME tax rate provisions through Law No. 11/2020 on Job Creation which came into effect on November 2, 2020. The following are the latest MSME tax rate provisions in Indonesia:
- Final Income Tax of 0.5% for MSMEs with annual turnover below IDR 4.8 billion. This rate applies to any type of business, except for the mining, oil, and gas sectors.
- Final Income Tax of 1% for MSMEs with annual turnover below IDR 4.8 billion in the mining, oil, and gas sectors.
- MSMEs with annual turnover above IDR 4.8 billion will be subject to income tax in accordance with the generally applicable ITA 21 rate.
- MSMEs conducting export activities will receive incentives in the form of a 0.5% Final Income Tax exemption and exemption from VAT on goods and services used in export activities.
- MSMEs conducting import activities will be subject to VAT on imported goods and services, but can obtain VAT exemption facilities provided that they have registered as registered importers and have fulfilled the applicable provisions.
- MSMEs that have businesses in the digital sector will be subject to VAT on goods and services traded through digital platforms. However, MSMEs can obtain a VAT exemption provided that they have registered as a small business actor in the network and have fulfilled the applicable provisions.
Those are some of the provisions of the latest MSME tax rates in Indonesia that MSME players should know. For additional information, Final Income Tax is an income tax imposed on certain income without the possibility of tax deduction. Meanwhile, ITA 21 is an income tax imposed on the income of employees or employees provided by the entrepreneur or employer.