Income Below 500 Million Rupiah is Not Subject to Income Tax
According to Government Regulation (GR) number 55 of 2022, income of up to 500 million rupiah received by certain taxpayers who are subject to final tax (businesses with turnover below 4.8 billion rupiah in 1 tax year and fulfill the requirements according to GR 55 of 2022), this income not subject to income tax.
Final Income Tax on Certain Small and Medium Businesses (Certain Taxpayers)
Income received by certain taxpayers (certain small and medium enterprises) may be subject to final income tax. This was previously regulated by Government Regulation number 23 of 2018 (GR 23-2018), then the provisions were replaced by Government Regulation number 55 of 2022 which took effect on December 20, 2022.
Final Income Tax Rates
The final income tax rate according to GR 55 of 2022 is still the same as GR 23 of 2018, which is 0.5% (zero point five percent).
Taxpayers Subject to Final Income Tax
Small and medium enterprises, namely domestic taxpayers who have a certain gross turnover subject to final Income Tax according to Government Regulation 55 of 2022 are:
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Fulfill requirements in GR 55-2022
Taxpayers are not Subject to Final Income Tax Rate of 0.5%
Conditions where taxpayers and their income are not subject to final income tax at a rate of 0.5% according to Government Regulation no. 55 in 2022 namely:
Taxpayers choose to be subject to Income Tax based on: 1) the rates of Article 17 paragraph (1) letter a of the Income Tax Law, for individual Taxpayers; or 2) the tariff of Article 17 paragraph (1) letter b of the Income Tax Law taking into account Article 31E of the Income Tax Law, for corporate Taxpayers;
The income is not income from casual work;
Not foreign income;
Not income that has been subject to final Withholding Tax with its own statutory provisions such as construction, rent of land/building etc..;
Not income that is exempt from tax objects.
Income That is Not Subject to Tax for Certain Individual Taxpayers (Those Subject to Final Income Tax) According to GR 55 of 2022
Entrepreneurs of SMEs, namely individual taxpayers who have a certain gross turnover (i.e. not exceeding IDR 4.8 billion) the share of gross turnover from businesses up to IDR 500,000,000.00 (five hundred million rupiah) in 1 (one) Tax Year are not subject to Income Tax.
This means that individual entrepreneurs whose turnover is below IDR 500 million a year are not taxable, as long as the income meets the requirements, it is subject to final income tax.
The Validity Period of the 0.5% Final Income Tax According to GR 55 of 2022
Final income tax for certain SME businesses as explained above is only valid for a certain period of time according to GR 55 of 2022, namely as follows:
7 (seven) tax years for individual taxpayers;
4 (four) tax years for corporate Taxpayers in the form of Cooperatives, Limited Partnerships, Firms, Village-Owned Enterprises/Joint Village-Owned Enterprises, or Individual Companies established by 1 (one) person; and
3 (three) tax years for corporate taxpayers in the form of a limited liability company.
An Example of a Final Income Tax Case for an Individual MSME Taxpayer
The examples of cases of imposition of final income tax for individual taxpayers of MSME entrepreneurs are as follows:
Mrs. Melya is an individual taxpayer who was newly registered in January 2022, owns a household appliance store business and fulfills the conditions for being subject to final income tax based on the provisions of GR 55/2022. The calculation that Ms. Melya must pay herself in the 2022 tax year is as follows:
Mrs. Melya is subject to final income tax based on the provisions of GR 55 of 2022 for the portion of business turnover that exceeds IDR 500 million in 1 (one) tax year. The final income tax that is imposed is 0.5% of IDR 700 million.
TGS AU Partners' Response to the Issuance of Government Regulation Number 55 of 2022
Yuli Aldyanti, SE, ACPA, BKP responded to the issuance of Government Regulation Number 55 of 2022 with "We at TGS AU Partners welcome the facility of income tax exemption for individual entrepreneurs given to taxpayers through GR number 55 of 2022, we hope this can be one of the economic stimuli, especially after the pandemic and in 2023 - 2024."
This article was written by the tax team TGS AU Partners (a group of professional firms consisting of public accounting firms and consulting firms in the fields of taxation, management, and business). This article may contain incomplete information, readers are expected to read the relevant regulations and consult with a person who understands the regulations and conditions of the reader before making a decision.