The Indonesian government has officially enacted Government Regulation No. 20 of 2026 (PP 20/2026), updating the Final Income Tax (PPh Final) framework for Micro, Small, and Medium Enterprises (MSMEs). While the regulation maintains the reduced 0.5% Final Income Tax rate, it introduces several key adjustments to ensure tax incentives are more targeted.
For MSME owners, understanding the payment mechanisms is critical. Under PP 20/2026, taxes can be settled in one of two ways—either via direct self-payment by the taxpayer or through withholding/collection by a counterparty—depending on the nature of the transaction.
Who Remains Eligible for the 0.5% Rate?
The 0.5% Final Income Tax rate applies to:
- Individual taxpayers with an annual gross turnover not exceeding IDR 4.8 billion per tax year.
- Corporate taxpayers registered as Limited Liability Companies (Perseroan Terbatas / PT) or Cooperatives (Koperasi) with an annual gross turnover capped at IDR 4.8 billion per tax year.
Note: Corporate taxpayers other than PTs and cooperatives registered after April 22, 2026 (the effective date of PP 20/2026) are no longer eligible for the MSME Final Income Tax scheme.
For individual taxpayers, the government continues to provide a tax exemption on annual turnover up to IDR 500 million, provided they meet all applicable tax compliance requirements.
Payment Mechanisms Under PP 20/2026
PP 20/2026 outlines two primary payment channels for settling the 0.5% tax:
- Direct Self-Payment
This option applies when transacting with parties who are not required to withhold or collect taxes on your behalf. Payments are processed through the government’s Coretax portal via the following steps:
- Log in to the Coretax portal.
- Select the Billing Code creation service (Pembuatan Kode Billing).
- Select Tax Account Code (KAP) and Payment Type Code (KJS) 411128-420.
- Enter the applicable tax period and tax year.
- Input the total Final Income Tax amount to be paid.
- Click Next (Lanjut) and download the generated Billing Code to complete the payment.
Payment Deadline: Direct tax payments must be settled on a monthly basis no later than the 15th day of the following month after the end of the tax period.
- Withholding or Collection by Counterparties
This option applies when conducting business with corporate entities or government institutions designated as tax withholding/collecting agents. Under this scheme, taxpayers must:
- Present an official Tax Exemption Certificate (Surat Keterangan) under PP 55/2022 to the counterparty.
- Obtain a Withholding Tax Receipt (Bukti Pemotongan / Bupot).
- Verify withholding tax slips through the e-Bupot menu on Coretax, if necessary.
- Maintain a detailed schedule of gross business revenue.
- Include a summary breakdown of gross revenue in the attachments of the Annual Income Tax Return (SPT Tahunan).
Critical Compliance Considerations for MSMEs
MSME owners must ensure their payment methods strictly align with PP 20/2026. Payment errors or late deposits can lead to administrative penalties and compliance risks.
Under Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP), late payments incur monthly interest penalties determined by the Minister of Finance, accruing for up to 24 months.
In addition, non-compliance elevates the risk of receiving an official Request for Explanation on Data and/or Information (Surat Permintaan Penjelasan atas Data dan/atau Keterangan / SP2DK) or triggering a tax audit if discrepancies are detected.
Business owners are strongly advised to periodically review their annual turnover, legal entity status, and active tax schemes to ensure continued eligibility for the 0.5% Final Income Tax rate.
Conclusion
While PP 20/2026 preserves the favorable 0.5% Final Income Tax rate for MSMEs, it refines both eligibility conditions and payment workflows. Taxpayers can meet their tax obligations either by direct payment through Coretax or through counterparty withholding, depending on transaction type.
Staying proactive and compliant with these procedures ensures smooth business operations while safeguarding against unexpected penalties and administrative hurdles.
