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Jakarta, Ideatax -- Since the Harmonization of Tax Regulations Act in 2021 enacted, the government has made many adjustments. One of them is related to taxes on MSME taxpayers. Taxes on MSMEs play a crucial role in the structure of the Indonesian economy because MSMEs contributed 61.07% to Indonesia's gross domestic product in 2021 (Sulastri 2022). In addition, MSMEs are also capable to absorb 97% of the workforce and 60.4% of total investment in Indonesia (Sulastri 2022). Therefore, the government takes a conciliatory stance in formulating policies related to MSME taxes. This conciliatory attitude can be seen in the reduction of the income tax rate for MSME taxpayers to 0.5% through PP 23 of 2018.
Please note that before 2018, the government imposed an Income Tax of 1% on the gross turnover of MSMEs. This is stipulated in Government Regulation Number 48 of 2013. Through this provision, the government stipulates that taxpayers who have a gross turnover of less than 4.8 billion rupiah are subject to a final income tax of 1% of gross turnover. On the one hand, the regulation makes it easier for MSMEs because the tax calculation is done by multiplying the gross revenue received each month with a tax rate of 1%. Thus, taxpayers do not need to make fiscal adjustments or corrections. In addition, taxpayers are also subject to a much lower rate of 1% compared to Income Tax Article 23 of 2% or Income Tax Article 25 of 20%.
However, upon further examination, this provision contains weaknesses. First, Income Tax is imposed on gross income and is final. Thus, regardless of the taxpayer's condition, whether they experience profits or losses, taxpayers are required to deposit the final income tax of 1%. For taxpayers who are experiencing profits, of course, there is no problem paying the final income tax. But not for taxpayers who are experiencing losses. Second, in PP 46 of 2013, the scheme used was withholding. Thus, for MSME taxpayers who do not conduct transactions with deductors, it will be harder to be detected by the tax authorities.
In 2018, this provision was amended. Through Government Regulation Number 23 of 2018, the government made several changes to Government Regulation 46 of 2013. There are several substantial changes regulated in the PP. First, the final income tax rate for MSMEs which was previously set at 1%, is reduced to 0.5%. Second, the payment scheme is changed from a withholding scheme into withholding and self-payment. Thus, taxpayers can self-remit the amount of tax payable under the principle of voluntary compliance. Third, there is a regulation regarding the maximum time limit for taxpayers to be allowed to use the 0.5% income tax scheme. For example, PT uses the 0.5% rate for three years since 2018. MSME taxpayers in the form of a CV, firm, cooperative, BUMD, or individual company use the income tax rate of 0.5% for four years since 2018. Meanwhile, MSME taxpayers, in the form of individuals use the 0.5% income tax rate for up to 7 years.
In 2021, the government issued the Law on Harmonization of Tax Regulations. Through Law Number 7 of 2021, the government, among others, regulates that individual taxpayers who have certain gross turnovers are not subject to income tax on the portion of gross turnover up to IDR 500,000,000 (five hundred million rupiah) in one tax year. This means that individual taxpayers who conduct business with a gross turnover of up to $500,000,000 do not need to pay income tax.
This provision is then derived from Government Regulation Number 55 of 2022 concerning the adjustment of regulations in the income tax sector. This provision also revokes Government Regulation Number 23 of 2018. However, the substance of PP 55 of 2022 still adopts the provisions of PP 23 of 2018. However, Government Regulation No. 55 of 2022 accommodates the provisions of the Income Tax Law regarding the limit of income subject to final tax on individual taxpayers with certain business turnover.
Furthermore, the provisions in PP Number 55 of 2022 are elaborated in Minister of Finance Regulation Number 164 of 2023 concerning Procedures for Imposition of Income Tax on Income from Businesses Received or Obtained by Taxpayers with Certain Gross Distribution and Business Reporting Obligations to be Confirmed as Taxable Entrepreneurs.
Through this provision, the government regulates that the income received or obtained by domestic taxpayers with a certain business circulation is subject to final income tax at a rate of 0.5%. Domestic taxpayers, as referred to in PMK 164 of 2023, include individual taxpayers and taxpayers in the form of cooperatives, partnerships, firms, and limited liability companies, including individual companies that have a gross turnover of less than $4,800,000,000 in one year.
However, this provision also regulates taxpayers who cannot utilize the final income tax of 0.5%, among others: taxpayers who choose to be subject to income tax based on the general provisions of income tax, taxpayers in the form of a partnership or firm formed by several individual taxpayers who have special expertise, permanent establishments, and taxpayers who obtain income tax facilities such as Article 31A facilities and facilities based on PP 94 of 2010 and PP 40 of 2021 regarding Special Economic Zones.
Not all taxpayers with a certain gross circulation income can be subject to income tax at a rate of 0.5%. There are several incomes that are exempted from the imposition of the final income tax of 0.5%, including income received by individual taxpayers from services in connection with independent work like experts, accountants, architects, doctors, land deed officials, actuaries, film players, musicians, hosts, athletes, and so on. Second, income received from abroad whose tax is paid or payable abroad. Third, income that is subject to final income tax, such as income from the sale and purchase of land and buildings. Fourth, income that is excluded as a tax object, such as income from grants or the inheritance of land and buildings.
References
Sulastri. 2022. Peran Penting UMKM dalam Ancaman Isu Resesi. Desember 06. Accessed January 20, 2024. https://www.djkn.kemenkeu.go.id/kpknl-balikpapan/baca-artikel/15677/Peran-Penting-UMKM-dalam-Ancaman-Isu-Resesi.html.
