BERITA TERKINI
JAKARTA, DDTCNews - The practice of splitting business entities, commonly referred to as split-offs, remains relatively widespread in Indonesia. Entrepreneurs employ this strategy to ensure that their turnover continues to satisfy the requirements for benefiting from the 0.5% MSME final income tax regime.
The issue of the micro, small and medium enterprise (MSME) final income tax has remained a prominent topic of discussion among netizens over the past week.
The Directorate General of Taxes (DGT) has identified 93,260 taxpayers suspected of engaging in business-splitting practices. This figure represents 17.21% of the total 542,000 MSME taxpayers registered in the system.
This has prompted the government to issue Government Regulation (Gov. Reg.) 20/2026, which incorporates anti-abuse provisions relating to the MSME final income tax regime.
“These policy adjustments have been undertaken to ensure that the benefits of tax incentives are genuinely enjoyed by MSMEs that require support to grow and develop,” the DGT wrote.
More specifically, records indicate that 28,010 individual taxpayers own between 2 and 4 MSMEs. Meanwhile, 1,877 individuals were recorded as owning between 5 and 25 MSMEs.
The DGT also identified 45 individuals who own between 26 and 50 MSMEs. Remarkably, 14 individuals were found to own more than 51 MSMEs.
These findings indicate that the MSME final income tax facility has not been entirely well-targeted, as the regime has also been utilized by large businesses disguising themselves as MSMEs through the fragmentation of business entities.
“Therefore, the regulatory framework has been refined to uphold fairness, encourage compliance and foster a conducive business climate,” the DGT wrote.
In addition to preventing large-scale entrepreneurs from benefiting from the MSME final income tax regime, the issuance of Gov. Reg. 20/2026 is also intended to encourage limited liability companies and limited partnerships (CVs), as formal business entities, to maintain transparent bookkeeping practices.
On another note, Gov. Reg. 20/2026 restricts access to the MSME final income tax regime to individual taxpayers, corporate taxpayers in the form of sole proprietorships as well as corporate taxpayers in the form of cooperatives.
Individual taxpayers and sole proprietorships may continue utilising the MSME final income tax regime without any time limitation, provided that the aggregate turnover of the individual taxpayer and any sole proprietorships owned by that taxpayer does not exceed IDR4.8 billion.
In contrast, cooperative taxpayers with annual turnover not exceeding IDR4.8 billion may utilise the MSME final income tax regime for a period of 4 tax years.
Apart from information concerning splitting practices, articles related to the MSME final income tax regime continued to garner substantial readership. Other widely read topics included the World Bank's projection for Indonesia's economic growth and the obligation for sole proprietorships to submit their financial statements through the Legal Entity Administration System (SABH).
The Ministry of MSMEs has highlighted the practice of business splitting frequently undertaken by entrepreneurs to take advantage of the MSME final income tax regime.
Reghi Perdana, Assistant to the Minister of MSMEs for Legal Affairs and Public Policies, stated that such practices undermine the effectiveness of the MSME final income tax scheme, which is fundamentally an affirmative policy measure.
“Such practices diminish the effectiveness of affirmative policies for MSMEs, while potentially reducing state revenues that could otherwise be used to finance various people's economic empowerment programmes, including MSME strengthening, job creation and poverty alleviation,” he said.
Continuing the above discussion, the government has assured that the amendments to the provisions on the MSME final income tax under Gov. Reg. 20/2026 will not impose additional burdens on MSMEs.
Reghi Perdana stated that Gov. Reg. 20/2026 was formulated to establish a fairer tax system. Through the regulation, he added, the government seeks to provide greater business certainty for MSMEs.
“Gov. Reg. 20/2026 neither increases tax burdens nor abruptly revokes MSMEs’ rights. On the contrary, the policy extends tax incentives for MSMEs,” he stated.
The DGT has affirmed that individual MSME taxpayers with turnover of up to IDR500 million in 1 tax year remain exempt from income tax.
Director General of Taxes, Bimo Wijayanto, stated that the provisions on the non-taxable turnover threshold stipulated under Art. 60 paragraph (2) of Gov. Reg. 55/2022 remain unchanged despite the issuance of Gov. Reg. 20/2026. According to him, taxpayers need not be concerned, as the provisions under Gov. Reg. 20/2026 are intended to support MSMEs as well as promote fairness.
“MSMEs need not worry. Insofar as they continue to qualify for the turnover requirement of between IDR0 and IDR500 million, they are not required to pay tax,” he claimed.
Sole proprietorships (perseroan perorangan in Indonesian) are required to submit their financial statements to the MINISTER OF LAW through the Legal Entity Administration System (Sistem Administrasi Badan Hukum/SABH in Indonesian).
This obligation is stipulated under Art. 27 paragraph (1) of Minister of Law Regulation 49/2025. The article states that sole proprietorships must submit financial statements by completing the prescribed form for the submission of financial statements.
“The financial statements of a sole proprietorship shall be reported to the minister by completing the electronic submission of financial statements form through the SABH no later than six (6) months after the end of the relevant accounting period,” reads Art. 27 paragraph (1) of Minister of Law Regulation 49/2025.
The World Bank projects Indonesia's economy to expand by only 5% this year.
According to the World Bank, the slowdown in Indonesia's economic growth is attributable to weaker exports resulting from declining demand from trading partners as well as a reduction in foreign direct investments (FDI).
“Resilient private consumption, continued public spending and ongoing domestic investment are expected to provide a near-term cushion,” the World Bank wrote in the June 2026 edition of its Indonesia Economic Prospects (IEP) report. (sap)
