The government has issued Government Regulation (Peraturan Pemerintah/PP) Number 20 of 2026 concerning Amendments to Government Regulation Number 55 of 2022 concerning Adjustments to Income Tax Provisions.
According to the regulation's recital, one of its objectives is to support a healthier business environment through a more targeted tax policy. Among the most notable changes are the revised rules governing the final income tax regime for businesses with certain turnover levels.
The final tax rules have undergone several revisions over the years, beginning with PP Number 46 of 2013, followed by PP Number 23 of 2018 and PP Number 55 of 2022.
Business Turnover Subject to Final Income Tax
As under the previous rules, income earned by certain domestic taxpayers remains subject to a final income tax of 0.5% of gross turnover.
The rate applies to:
- individual taxpayers; and
- sole proprietorships,
with an annual gross turnover of less than IDR 4.8 billion.
As a result, individual taxpayers and sole proprietorships with annual turnover exceeding IDR 4.8 billion are no longer eligible to use this final tax rate.
Changes Introduced by PP Number 20 of 2026
One of the most significant changes concerns the categories of taxpayers that may benefit from the 0.5% final tax rate.
Under previous regulations, entities such as limited partnerships (CVs) and limited liability companies could qualify for the regime. PP Number 20 of 2026 narrows that scope considerably.
Under the new rules, the rate is available only to:
- individual taxpayers;
- sole proprietorships; and
- cooperatives.
Exempted Taxpayers
Even if their annual turnover is below IDR 4.8 billion, certain taxpayers cannot use the 0.5% final tax rate. These include:
- taxpayers that elect to be taxed under the general income tax rates provided under Article 17, Paragraph 1, Letters a and b of the Income Tax Law;
- taxpayers already receiving final tax treatment under specific provisions, including Article 31A of the Income Tax Law, PP Number 94 of 2010, and PP Number 40 of 2021;
- permanent establishments (PEs); and
- cooperatives that have exceeded four years since registration.
Income Covered by the Final Tax Rate
The 0.5% final tax applies to business income earned by eligible taxpayers under PP Number 20 of 2026.
However, several categories of income remain outside the scope of this regime.
Income From Independent Professional Services
Income earned by individuals from professional or freelance services is excluded, including income derived from:
- lawyers, accountants, architects, doctors, consultants, notaries, land deed officials, appraisers, actuaries, and similar professions;
- musicians, entertainers, singers, directors, film crews, models, actors, artists, dancers, sculptors, content creators (e.g., influencers, bloggers, and vloggers), and other creative professionals;
- athletes;
- trainers, lecturers, speakers, counselors, moderators, and similar occupations;
- authors, researchers, translators, and related professions;
- advertising agents;
- project supervisors and project managers;
- brokers and intermediaries;
- sales agents;
- insurance agents; and
multi-level marketing distributors and comparable activities.
Foreign-Sourced Income
Income earned abroad that is taxable in another jurisdiction does not fall within the scope of this final tax rate.
Income Already Subject to Final Tax
Several types of income that are already subject to separate final tax provisions are also excluded, including:
- gains from the sale of land and/or buildings;
- rental income from land and/or buildings;
- construction services income; and
other income subject to final tax under separate regulations.
Non-Taxable Income
Income that is specifically excluded from taxation under the tax law also remains outside the regime, including:
- grants;
- inheritances;
- religious or social assistance; and
- other forms of non-taxable income provided for under prevailing tax regulations.
Removal of the Time Limitation
Another notable change under PP Number 20 of 2026 concerns the period during which taxpayers may use the 0.5% final tax rate.
Previous regulations imposed a maximum utilization period that varied depending on the type of taxpayer. PP Number 20 of 2026 removes this restriction.
Therefore, eligible individual taxpayers and sole proprietorships may continue to use the rate as long as they satisfy the applicable subjective and objective requirements.
Take-Aways for Businesses
PP Number 20 of 2026 retains the 0.5% final income tax rate while introducing important changes to its scope and eligibility requirements. The regulation narrows the categories of taxpayers eligible to use the rate, clarifies several exclusions, and removes the prior time restrictions on its use.
For businesses, understanding these changes is essential to ensure the correct application of the rule and ongoing tax compliance.
If you need further assistance complying with the latest tax rules, Ideatax is ready to help.
Also read:
The Chart of Accounts for Coretax Reporting