PP 20 Year 2026: PT and CV Can No Longer Use the 0.5% Final UMKM Tax Rate

Indonesia has introduced a significant change to its tax regulations through Government Regulation – PP 20 Year 2026. One of the most important changes affects small and medium-sized businesses operating as PT (Limited Liability Companies) and CV (Limited Partnerships).

Under the new regulation, PT and CV entities are no longer eligible to use the popular 0.5% Final Income Tax (PPh Final UMKM) scheme. Instead, they must generally transition to the standard Corporate Income Tax system.

This article explains what has changed, who is affected, the available tax incentives, and practical calculation examples to help business owners understand the impact.

What Was the 0.5% Final UMKM Tax?

The Final UMKM Tax was a simplified tax regime designed for small businesses with annual gross revenue of up to IDR 4.8 billion.

Under this scheme, businesses only paid:

0.5% × Gross Revenue (Turnover)

The biggest advantage was simplicity. Businesses did not need to calculate net profit or maintain complex tax calculations.

Example

Annual Revenue: IDR 3,000,000,000

Tax:

0.5% × 3,000,000,000 = IDR 15,000,000

The annual tax payable would be only IDR 15 million.

What Changed Under PP 20 Year 2026?

Under PP 20 Year 2026, the government narrowed the list of taxpayers eligible for the 0.5% Final UMKM Tax facility.

Taxpayers Still Eligible

The following taxpayers may continue using the 0.5% Final UMKM Tax:

Individual Taxpayers (Orang Pribadi)
Perseroan Perorangan (Single-Shareholder Company)
Cooperatives (Koperasi)

Provided their annual gross revenue does not exceed IDR 4.8 billion.

Taxpayers No Longer Eligible

The following business entities can no longer use the 0.5% Final UMKM Tax:

PT (Limited Liability Company)
CV (Limited Partnership)
Firma
Certain other legal entities

These businesses must generally follow the normal Corporate Income Tax regime.

Why Did the Government Introduce This Change?

The government aims to:

Improve fairness in the tax system.
Prevent misuse of the UMKM facility.
Encourage businesses to maintain proper bookkeeping.
Support the transition of growing businesses into more formal corporate structures.

How Will PT and CV Be Taxed Now?

PT and CV entities must generally calculate taxes based on their taxable profit.

Step 1

Determine Gross Revenue

Step 2

Deduct Business Expenses

Examples:

Employee salaries
Office rent
Utilities
Marketing expenses
Professional fees
Operational costs

Step 3

Calculate Taxable Income

Taxable Income = Revenue − Expenses

Step 4

Apply Corporate Income Tax Rate

Current Corporate Income Tax Rate: 22%

Good News: PT and CV May Still Receive a 50% Tax Reduction

Although PT and CV can no longer use the 0.5% Final UMKM Tax, many small and medium businesses may still qualify for a tax incentive under Article 31E of the Indonesian Income Tax Law.

This facility provides a:

50% reduction of the normal Corporate Income Tax rate

Since the normal tax rate is: 22%

the reduced rate becomes:

22% × 50% = 11%

This is often referred to as the effective 11% tax rate facility.

Who Can Receive the 50% Corporate Tax Facility?

Generally, taxpayers may qualify if:

Annual gross revenue does not exceed IDR 50 billion.
Proper bookkeeping is maintained.
The taxpayer is subject to Corporate Income Tax regulations.

Important: Not All Profit Is Automatically Taxed at 11%

A common misunderstanding is that the entire company’s profit is taxed at 11%.

In reality:

The profit attributable to the first IDR 4.8 billion of revenue receives the 11% rate.
The remaining profit is taxed at the normal 22% rate.

Example 1 – PT with Revenue of IDR 3 Billion

Annual Revenue

IDR 3,000,000,000

Business Expenses

IDR 2,400,000,000

Taxable Profit

IDR 600,000,000

Since annual revenue is below IDR 4.8 billion, the entire taxable income qualifies for the facility.

Tax Calculation

11% × 600,000,000 = IDR 66,000,000

Comparison

Tax Method	Annual Tax
Old UMKM 0.5%	IDR 15,000,000
Corporate Tax 22%	IDR 132,000,000
Corporate Tax with 50% Facility (11%)	IDR 66,000,000

Although the tax is higher than the previous UMKM regime, it is still significantly lower than the standard 22% Corporate Income Tax.

Example 2 – PT with Revenue of IDR 10 Billion

Annual Revenue

IDR 10,000,000,000

Business Expenses

IDR 8,000,000,000

Taxable Profit

IDR 2,000,000,000

Because annual revenue exceeds IDR 4.8 billion, only part of the taxable income qualifies for the facility.

Step 1: Determine Eligible Revenue Portion

Eligible Revenue:

IDR 4.8 billion

Percentage:

4.8 billion ÷ 10 billion

= 48%

Step 2: Allocate Taxable Income

Profit eligible for facility:

48% × 2,000,000,000 = IDR 960,000,000

Remaining taxable income:

2,000,000,000 − 960,000,000 = IDR 1,040,000,000

Step 3: Calculate Tax

Tax on facility portion:

11% × 960,000,000 = IDR 105,600,000

Tax on remaining portion:

22% × 1,040,000,000 = IDR 228,800,000

Total Tax:

IDR 105,600,000 + IDR 228,800,000 = IDR 334,400,000

Example 3 – Service Company with High Profit Margin

Revenue

IDR 2,000,000,000

Expenses

IDR 500,000,000

Taxable Profit

IDR 1,500,000,000

Because revenue is below IDR 4.8 billion, the entire profit receives the reduced rate.

Tax

11% × 1,500,000,000 = IDR 165,000,000

Comparison

Under the previous UMKM regime:

0.5% × 2,000,000,000 = IDR 10,000,000

Difference:

IDR 165,000,000 − IDR 10,000,000 = IDR 155,000,000

This demonstrates how service businesses with high profit margins may experience a significant increase in tax liability under the new rules.

What About Individual Business Owners?

Individual taxpayers remain eligible for the 0.5% Final UMKM Tax as long as their annual turnover does not exceed IDR 4.8 billion.

Example

Annual Revenue:

IDR 1,200,000,000

Tax:

0.5% × 1,200,000,000 = IDR 6,000,000

Annual tax payable remains only IDR 6 million.

What About Perseroan Perorangan?

A Perseroan Perorangan (Single-Shareholder Company) remains eligible for the 0.5% Final UMKM Tax facility if:

It is established by one individual.
It meets the legal requirements as a Perseroan Perorangan.
Annual revenue does not exceed IDR 4.8 billion.

For many small entrepreneurs, this structure may become more attractive than a conventional PT.

Key Takeaways

No Longer Eligible for the 0.5% UMKM Tax

❌ PT (Limited Liability Companies)

❌ CV (Limited Partnerships)

❌ Firma

Still Eligible for the 0.5% UMKM Tax

✅ Individual Taxpayers

✅ Perseroan Perorangan

✅ Cooperatives

Corporate Tax Incentive Still Available

✅ Businesses with annual revenue up to IDR 50 billion may still receive a 50% reduction of the Corporate Income Tax rate.

✅ Effective tax rate:

22% × 50% = 11%

Conclusion

PP No. 20 Year 2026 marks a major shift in Indonesia’s taxation system for small and medium-sized businesses. While PT and CV entities can no longer benefit from the 0.5% Final UMKM Tax, many businesses may still enjoy substantial tax savings through the 50% Corporate Income Tax reduction facility under Article 31E.

Business owners should review their company structure, bookkeeping practices, and tax planning strategies to ensure compliance and maximize available tax benefits under the new regulation.

Disclaimer: This article is intended for general informational purposes only and should not be considered legal, tax, or accounting advice. Businesses should consult a qualified Indonesian tax consultant for advice specific to their circumstances.