Final Income Tax 0.5 percent Starting January 2021 Returns to be Valid

by | Jan 20, 2021 | Taxation

In 2018, the Government officially issued Government Regulation (PP) Number 23 of 2018 which discusses Income Tax (PPh) for income from businesses that are received or earned by Taxpayers (WP) with certain gross turnover (turnover). The regulation is a revision of the final PPh for micro, small and MSME entrepreneurs.

Government Regulation Number 23 Year 2018 revises Government Regulation Number 46 Year 2013. Individual and Corporate Taxpayers in the form of cooperatives, limited partnership, firms, or limited liability companies receive a rate change from 1 percent to 0.5 percent. The rate change is based on the criteria of WP with a turnover of below Rp. 4.8 billion in a year.

hukum, pph

The main points of amendments to PP Number 46 of 20013 to Government Regulation Number 23 of 2018 are:
Decrease in Final Income Tax rates by 1% to 0.5% of turnover, which must be paid monthly;

  • Taxpayers can choose to follow the rate with the final 0.5% scheme, or use the normal scheme which refers to Article 17 of Law Number 36 Year 2008 concerning Income Tax.
  • Set the duration for the imposition of Final Income Tax rates of 0.5% as follows:
  • For individual taxpayers, namely for 7 years;
  • For corporate taxpayers in the form of cooperatives, limited partnership, or firm for 4 years;
  • For Corporate Taxpayers in the form of Limited Liability Companies for 3 years.

The rate reduction from 1 percent to 0.5 percent is believed to reduce the tax burden so that business actors can increase their economic capacity to develop their respective businesses. The government hopes that the existence of PP Number 23 of 2018 can develop the business world as well as make it easier for Taxpayers to fulfil their tax obligations.

However, in September 2020, according to the Announcement Number PENG-10 / PJ.09 / 2020 issued by the Directorate General of Taxes (DGT) concerning the Deadline for Application of Final Income Tax Based on PP No. 23/2018 for Corporate Taxpayers, reminds the end of Limited Liability Company Taxpayers to be able to use the 0.5% Final Income Tax rate.
In accordance with Article 2 of PP 23/2018, income from businesses received or obtained by domestic taxpayers who have a certain gross circulation is subject to final income tax within a certain period of time. One of them, Corporate Taxpayers in the form of PT which must end using this 0.5% Final Income Tax rate by the end of 2020.

pajak, pph

In accordance with Article 5 paragraph (1) of PP 23/2018, a certain period of time for imposition of final PPh with a rate of 0.5% is the maximum:

  • 7 years for Individual Taxpayers
  • 4 years for Corporate Taxpayers in the form of a Cooperative, CV, or Firm
  • 3 years for Corporate Taxpayers in the form of Limited Liability Companies (PT)

The period for the use of the 0.5 percent Final Income Tax rate for the WP commences:

  • Registered Taxpayer Tax Year, for registered Taxpayers since the enactment of the PP
  • The tax year that the PP comes into force, for taxpayers who have been registered before the enactment of this PP

From the provisions of the article which regulates the period for the imposition of Final Income Tax with a rate of 0.5 percent starting in 2018, Limited Liability Taxpayers must end the use of this tariff convenience.

For more details about the PPh policy, please consult by contacting e-mail ongki@solutions-integra.com or contact +62 857 8232 9000. Integra Consulting is ready to provide assistance in managing personal income tax and corporate taxpayers.

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