Relax! MSME Final Income Tax Extension Assured Despite Pending Rules

JAKARTA, DDTCNews - MSME entrepreneurs can now breathe a sigh of relief. The 0.5 final income tax rate applicable to MSME entrepreneurs will remain in place until 2029.

The topic surrounding the extension of the final income tax has been in the spotlight of netizens over the past week.

Despite the government’s confirmation of the extension of the final income tax for MSME entrepreneurs until 2029, the technical regulations have yet to be issued, raising questions among taxpayers.

Coordinating Minister for Economic Affairs, Airlangga Hartarto, assured that all individual taxpayers constituting MSME entrepreneurs may continue applying the 0.5 final income tax rate until 2029.

According to Airlangga, these tax provisions apply to MSMEs with a turnover of up to IDR4.8 billion a year. He added that the government is currently preparing a revision to Gov. Reg. 55/2022, which serves as the legal basis for the extension of the 0.5% final income tax regime for individual MSMEs.

“The final income tax is guaranteed [to apply] until 2029, MSMEs will only be subject to the 0.5% final income tax rate for turnover up to IDR4.8 billion,” he claimed.

The continuation of the MSME final income tax scheme is part of the government’s stimulus programmes.

The extension of the 0.5% MSME final income tax is aimed at easing tax burdens while simplifying taxpayers' administrative obligations.

In 2025, the government allocated IDR2 trillion to support the programme, which has so far registered 542,000 MSME taxpayers.

To formalise the extension of the final income tax period for individual MSMEs until 2029, the government needs to revise Gov. Reg. 55/2022, a legal basis for MSMEs in fulfilling their tax obligations.

Director General of Taxes Bimo Wijayanto noted that the Ministry of Finance has coordinated with relevant ministries on the revision of Gov. Reg. 55/2022.

“We have coordinated with the relevant ministries, the Coordinating Ministry for Economic Affairs and the Ministry of MSMEs. The initiative permit has been granted by the president through the Ministry of State Secretariat on 25 August,” remarked Bimo.

In addition to the extension of the MSME final income tax regime, a number of tax-related developments also merit attention. These include updates on cigarette excise rates for next year, revisions to the Law concerning state-owned enterprises (SOE or badan usaha milik negara/BUMN in Indonesian), taxation of Netflix and similar platforms and reports on funds still parked in banks.

The following is a comprehensive review of the tax articles.

Cigarette Tax Held Steady, Industry Finds Relief

The Ministry of Industry (Kementerian Perindustrian/Kemenperin in Indonesian) reported that the tobacco product industry (industri hasil tembakau/IHT in Indonesian) continues to face pressure from high excise tariffs and the proliferation of illegal cigarettes.

Deputy Minister of Industry, Faisol Riza, stated the Ministry of Finance's plan to maintain the cigarette excise tariff in 2026 is like a breath of fresh air for the national tobacco product industry. With certainty on excise, the industry no longer needs to worry about the increase in excise tariffs.

“This [maintaining excise duty] is one of the government's efforts to ease the pressure currently weighing on the industry due to a wide array of conditions,” he added.

Purbaya's Response to Cigarette Excise Policy

Minister of Finance, Purbaya Yudhi Sadewa, acknowledged that the decision not to increase cigarette excise rates in 2026 has sparked both pros and cons.

Purbaya stressed, however, that the policy of not increasing cigarette excise tariffs was adopted to safeguard the national tobacco product industry (industri hasil tembakau/IHT in Indonesian), which plays a pivotal role in absorbing labour.

“Every policy is subject to pros and cons; there are support and criticism. What matters is choosing what delivers the greatest benefit for the economy and society,” he further elaborated.

Taxes on Transactions with Danantara

The government and Commission VI of the House of Representatives (Dewan Perwakilan Rakyat/in Indonesian) have agreed to insert a special article related to taxation in the revision of the SOE Law.

The article in question refers to Article 89A, which specifically stipulates the tax treatment of transactions involving the Daya Anagata Nusantara Investment Management Agency (Badan Pengelola Investasi Daya Anagata Nusantara/BPI Danantara in Indonesian), investment holdings, operational holdings and its entities.

"The tax treatment of transactions involving entities, operational holdings, investment holdings or third parties is stipulated under a government regulation (Gov. Reg.),” said Deputy Chairperson of Commission VI, Andre Rosiade, while reading out the conclusion of the meeting.

Why Hasn't Netflix Been Taxed Yet?

The government has yet to collect taxes on revenues derived by digital giants, such as Netflix, Google and Facebook, from furnishing services in Indonesia.

A Directorate General of Economic and Fiscal Strategy (Direktorat Jenderal Strategi Ekonomi dan Fiskal/DJSEF in Indonesian) Senior Fiscal Policy Analyst of the Ministry of Finance, Melani Dewi Astuti, explained that the government must first issue a legal basis, which specifically accommodates the taxation of the digital economy sector. She highlighted that the issuance of regulations is the most fundamental measure.

“To date, Indonesia lacks a legal basis to impose taxes on income derived by foreign e-commerce [perdagangan melalui sistem elektronik/PMSE in Indonesian] from consumers in Indonesia. Other mechanisms, such as a digital services tax (DST), are also not yet in effect,” she added.

Substantial Funds Remain Parked in Banks

The Ministry of Finance has drawn attention to several factors contributing to the sluggish realisation of regional spending, which has resulted in substantial local government funds remaining idle in banks.

Director General of Treasury of the Ministry of Finance, Astera Primanto Bhakti, reported that local government funds deposited in banks had accumulated to IDR233.11 trillion as of August 2025. He noted that the persistence of such idle funds reflects a longstanding issue.

“What is happening with the IDR233 trillion in local government funds? This has been a recurring problem. In practice, it is not much different from the central government. They [local governments] typically draft their budgets in September–October of the previous year, and only thereafter begin entering into contracts,” he explained. (sap)