Finance Minister Purbaya Yudhi Sadewa opened the opportunity to make the final Income Tax (PPh) rate for UMKM players of 0.5% a permanent policy. Currently, the 0.5% final income tax rate has been extended until 2029 for UMKM with a maximum turnover of IDR 4.8 billion per year. Small income tax is needed by UMKM players to ease the burden.
In a press conference with journalists at the Ministry of Finance Office, Jakarta, Friday (14/11/2025), Purbaya emphasized that the opportunity can only be considered if business actors show full compliance in reporting turnover.
The government will not maintain this incentive if there are still efforts to avoid tax obligations. Purbaya emphasized that reporting discipline is the main requirement before a decision is taken.
Purbaya highlighted the practice of splitting the business to keep the turnover below the limit of IDR4.8 billion per year. He cautioned against manipulating turnover to get a lighter tax burden.
This 0.5% tariff, he said, should only be applied to UMKM that are truly in that category.
"If they really don't lie, it should be okay to make it permanent," he said.
The government will monitor developments over the next two years to see how this regulation works in the field. Purbaya believes that this evaluation is important to ensure that incentives are not used by businesses that are already in the larger category.
He also wants to ensure that the final tariff scheme does not discourage businesses from developing. Further decisions will only be considered after the assessment process is complete.
Currently, the 0.5% final income tax rate has been extended until 2029 for UMKM with a maximum turnover of IDR4.8 billion per year. Purbaya said that the technical rules related to this policy are still being finalized by the Directorate General of Taxes.
The refinement process has not yet been completed and will be accelerated. The government hopes that clearer rules can facilitate implementation in the field.
Purbaya also opened the possibility of extending incentives for individual taxpayers after 2029. He said the internal study regarding this matter is still ongoing and does not yet have a target completion time. According to him, the opportunity for extension remains open as long as there is no attempt by business actors to circumvent the turnover limit. The government wants to ensure that this tax facility is received by those who are truly entitled.
Light tax is still needed
Contacted separately, Secretary General of the Indonesian UMKM Association (Akumindo) Edy Misero assessed that the 0.5% final income tax policy is still needed by UMKM players. According to him, the government's decision to maintain the rate until 2029 provides certainty for small businesses in economic conditions that have not fully recovered.
All business actors still have an obligation to contribute to the state, but the 0.5% tariff is the right form of relief for now. "We must be grateful," he said.
Edy also reminded that tax policy is basically not fixed. He explained that the tariff amount will be re-evaluated according to the situation and the country's ability after 2029. According to him, tariffs can increase or decrease depending on economic developments so that permanent discourse does not need to be concluded now. "No government policy is forever," he said.
Regarding the government's concern about the practice of splitting businesses to avoid higher tax rates, Edy admitted that it did happen but was only done by a small number of business actors.
He asked that the case not be used as a general description of the behavior of UMKM as a whole. According to him, business actors who are proven to manipulate turnover must be dealt with according to the rules. "There is no data, don't generalize," he said.
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Edy emphasized that supervision of tax compliance is in the hands of the government as the authority that has the tools and resources to do so. He pointed out that Akumindo does not have a supervisory apparatus so that the association's role is focused on education and assistance to UMKM players.
Edy encouraged business actors to understand the risks and legal consequences of circumventing tax regulations. An honest and responsible attitude, said Edy, is the key so that the 0.5% final income tax policy remains beneficial for eligible UMKM .
Light tax
Meanwhile, chairman of the Indonesian Micro, Small and Medium Enterprises Industry Association (Akumandiri) Hermawati Setyorinny assessed that the discourse on the permanence of the 0.5% final income tax rate must be accompanied by clear socialization to business actors. Hermawati revealed that many micro-entrepreneurs do not understand that the rate only applies to turnover above Rp500 million to Rp4.8 billion.
According to him, confirmation of the turnover limit is important so that micro-entrepreneurs do not panic or misunderstand the information. He asked the government to ensure that communication is open and does not cause new fears among small businesses.
Hermawati assessed that the biggest burden for UMKM players comes from VAT, which affects production costs and daily consumption. Business actors bear VAT on various lines of expenditure, including the purchase of raw materials and daily necessities. According to her, the continuous increase in prices makes the pressure even heavier than the final income tax rate. "VAT in Indonesia is the highest compared to other countries," he said.
Hermawati reminded that the tax discourse should not stop as a statement that attracts positive sentiment. Hermawati said UMKM players want to see real implementation from the government, not just a discourse that changes.
Hermawati added that small businesses have often been affected by the enforcement of regulations, while large players who violate tend not to be highlighted. She hopes that policy consistency can be strengthened so that UMKM are not always the most vulnerable party in tax enforcement.
Regarding the practice of adjusting turnover, Hermawati said that small business actors very rarely do this. The increasingly fierce competition makes it difficult for micro-entrepreneurs to manipulate turnover to avoid tax rates.
According to him, such actions are more often carried out by large business actors who try to downgrade in order to get lighter tariffs. "In fact, that's what big businessmen usually do," he said.
"If you want to oblige business actors, it must be balanced with education, human resource development, and greater domestic market opportunities. Don't just pursue the tax target, but other things in the business ecosystem also need to be addressed. The price of basic commodities continues to rise, so small businesses need concrete support from the government," said Hermawati.
Needs coaching
Professor of Economics at Gadjah Mada University's Vocational School, Mudrajad Kuncoro, believes that the 0.5% final income tax rate is a very meaningful fiscal incentive for micro and small businesses.
According to him, this policy helps ease the tax burden so that businesses can more easily survive and thrive amid economic pressure. The incentive also encourages informal businesses to enter the formal sector, which currently amounts to around 60%. "It is very good to ease the burden on micro and small businesses," he said.
Mudrajad said the permanent low tariff could improve the stability of business planning as UMKM could project their tax obligations with more certainty. However, he reminded that the setting of this rate also has the consequence of losing potential state revenue. "UMKM must be honest in reporting turnover, do not make their business smaller to avoid taxes," he said. Reporting compliance is very important so that this incentive is not misused by business actors who try to avoid higher rates.
Regarding the plan to make the policy permanent, Mudrajad emphasized the importance of guidance to UMKM from various related ministries. He considered that mentoring, training, and bookkeeping education need to be expanded so that micro businesses do not stagnate in the same group. According to him, cross-sectoral support will help UMKM improve their managerial capacity and open up opportunities to upgrade.
"Micro businesses should not continue to be small, but must be able to graduate to become billion businesses. The Ministry of UMKM and related ministries must really assist business actors, including through education on how to record turnover and manage businesses properly. Assistance and training are important so that UMKM players can develop and not stop as micro businesses," he said.
