Overview of PP No. 20/2026
In June 2026, Indonesia enacted Government Regulation (Peraturan Pemerintah) Number 20 of 2026, which amends PP 55/2022 regarding income tax treatment for Usaha Mikro, Kecil, dan Menengah (UMKM)—micro, small, and medium enterprises. Key points include:
- Eligible individual taxpayers and sole proprietorships (perusahaan perorangan) with annual turnover up to IDR 4.8 billion (approx. USD 300,000) are subject to a final income tax rate of 0.5%, permanently. (pajak.go.id)
- Cooperatives receive the same 0.5% final tax rate and maintain the four-year eligibility period since registration; transition rules apply to those previously under PP 55/2022. (pajak.go.id)
- Notably, costs related to corrupt acts or bribery are not deductible—an integrity measure intended to align tax policy with ethical standards. (pajak.go.id)
Practical Implications & Tips for UMKM
Who benefits most?
- Solo owners or individual business operators whose turnover does not exceed IDR 4.8 billion.
- Small cooperatives that qualify under the criteria.
Considerations for other business structures
- Entities such as firmas, CVs or PTs that do not meet UMKM criteria must use standard (non-final) income tax rates from the outset. (pajak.go.id)
- Businesses close to the turnover threshold should monitor sales closely to determine eligibility each year.
Actionable Strategies
- Keep precise records of turnover and sales, not just profits, to confirm whether you remain under the limit.
- Maintain clean accounting, especially excluding bribes or illegal payments, since those are not deductible.
- Use the grace period if currently under final tax regime to adjust business plans if you will exceed thresholds.
Broader Tax Planning Considerations
- A 0.5% tax on turnover simplifies compliance—but some businesses might prefer standard rates if profit margins are high.
- For UMKM above threshold or choosing general scheme: explore credits, deductions, and business expense recognition under the standard PPh regime.