World Bank: SME Final Income Tax Threshold of IDR4.8bn Excessive

JAKARTA, DDTCNews — The gross turnover threshold for the SME final income tax scheme, currently set at IDR4.8 billion, is still considered too high by the World Bank.

In a report entitled Indonesia: Unlocking Businesses' Tax Potential for Growth, the World Bank states that the high turnover threshold for alternative final tax eligibility allows larger firms to benefit from the tax regime.

"The threshold enables relatively large firms— potentially with sufficient capacity to manage CIT requirements—to remain under a simplified tax system, creating inefficiencies and revenue loss," wrote the World Bank, as cited on Wednesday (29/7/2026).

The excessively high turnover threshold also encourages businesses to engage in splitting operations to continue benefiting from the SME final income tax scheme.

"This weakens the integrity of the tax system and may result in lower tax revenues, highlighting the need to reassess the threshold to better align the alternative final tax with its intended purpose of supporting genuinely small businesses," the World Bank stated.

Although the SME final income tax gross turnover threshold remains at IDR4.8 billion per year, it should be noted that the government has narrowed the scope of taxpayers permitted to utilise the scheme.

With the entry into force of Gov. Reg. 20/2026, the SME final income tax scheme at a rate of 0.5% of turnover may now only be utilised by individual taxpayers as well as corporate taxpayers in the form of sole proprietorships and cooperatives.

Individual taxpayers and sole proprietorships may utilise the SME final income tax scheme indefinitely, provided that the aggregate turnover of the individual taxpayer together with any sole proprietorship they own does not exceed the IDR4.8 billion threshold.

Meanwhile, corporate taxpayers in the form of cooperatives with a turnover of no more than IDR4.8 billion may utilise the SME final income tax scheme for 4 tax years. (rig)