World Bank Flags SME Final Tax and Taxable Person Threshold Excessive
JAKARTA, DDTCNews — The World Bank considers the gross turnover threshold for the SME final income tax scheme of IDR4.8 billion to be too high. This topic features among the national media reviews today, Thursday (30/7/2026).
In its 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," the World Bank wrote in its report.
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.
On the other hand, 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.
In addition to the above topic, there are reviews concerning tax disputes that remained unresolved until the end of 2025. There is also a discussion relating to tax refund liabilities, SP2DKs leading to re-examination, preparations for the USKP and other matters.
The following is a full review of the tax articles.
World Bank Flags VAT Registration Turnover Threshold
The World Bank considers the turnover threshold at which an entrepreneur is required to be registered as a taxable person (pengusaha kena pajak/PKP in Indonesian) to still be high, with the potential to distort business behaviour and narrow the tax base.
According to the World Bank, the IDR4.8 billion turnover threshold — nearly 70 times Indonesia's GDP per capita — is among the highest in the world and significantly higher than the thresholds applicable in middle-income OECD and ASEAN member countries.
This encourages entrepreneurs to under-report their turnover or split their business activities to remain below the threshold. This ultimately disrupts the VAT credit chain and narrows the tax base. (DDTCNews)
Unresolved Tax Disputes Continue to Soar
The value of unresolved tax disputes continues to increase. These tax dispute records are set out in the Directorate General of Taxes (DGT) Financial Report 2025.
At the end of 2025, the value of unresolved disputes was recorded at IDR176.15 trillion and USD3.6 billion. This represents an increase compared with the position at the end of 2024, which stood at IDR148.99 trillion and USD1.65 billion.
"The number of tax assessments/decisions/rulings subject to objection, non-objection (amendment, reduction, nullification and cancellation), appeal, lawsuit and civil review (peninjauan kembali/PK in Indonesian) that remained unresolved as at 31 December 2025 was 64,625 tax assessments/decisions/rulings with a nominal value of IDR176.15 trillion and USD3.6 billion," the DGT stated. (DDTCNews)
Tax Refund Liabilities Rise at End of 2025
The DGT recorded tax refund liability of IDR70.25 trillion as of 31 December 2025. This value represents an increase of 13.85% from the end-2024 position of IDR61.70 trillion.
Based on the DGT Financial Report 2025, the tax refund liability represents the total tax assessments or decisions resulting in an overpayment (SKPIB/SPMKP/SPMIB) as of 31 December 2025 for which a fund disbursement order (surat perintah pencairan dana/SP2D in Indonesian) has not yet been issued.
In nominal terms, the largest refund liability originated from value added tax (VAT) and sales tax on luxury goods (STLGs), reaching IDR52.26 trillion, up 26.18% compared with the previous year's figure of IDR41.42 trillion. The increase amounts to approximately IDR10.84 trillion. (Kontan)
SP2DK May Lead to Re-examination
The series of requests for data and/or details (penjelasan data dan/atau keterangan/P2DK in Indonesian) may result in the DGT repeating its material compliance examination.
A material compliance examination will be repeated, among others, where the report on the results of the request for data and/or details (laporan hasil permintaan penjelasan data dan/atau keterangan/LHP2DK in Indonesian) concludes that there is new data in the system that has not been incorporated into the KKPt and LHPt materials constituting the basis for the issuance of the letter of inquiry (surat permintaan penjelasan data dan/atau keterangan/SP2DK in Indonesian).
"...the conclusion referred to in number (2) letter (l) shall be followed up on by the implementation of Re-Material Compliance Examination," reads the Director General of Taxes Circular Letter Number SE-8/PJ/2026. (DDTCNews)
MoF Reg. 49/2026 Sets Special Remittance Deadline for VAT on TDLN
Through MoF Reg. 49/2026, the Ministry of Finance (MoF) stipulates the deadline for value added tax (VAT) remittance on cross-border digital transactions (transaksi digital luar negeri/TDLN in Indonesian). The remittance deadline differs between issuers and operators of the TDLN tax collection system (sistem pemungutan pajak atas TDLN/SPP-TDLN in Indonesian).
Pursuant to the provisions, the issuer (bank/institution facilitating payment) is the party responsible for collecting VAT on TDLN. The issuer subsequently remits the VAT it has collected to the SPP-TDLN operator. This remittance must be conducted within a maximum of 7 days after the VAT is collected.
"The other party [issuer] is required to remit the collected Value Added Tax through the SPP-TDLN Operator, no later than 7 (seven) days from the date the SPP-TDLN Operator provides confirmation [confirmation that the TDLN is subject to VAT, which simultaneously constitutes the time of supply for VAT]," reads Article 12 paragraph (1) of MoF Regulation 49/2026. (DDTCNews)
Briefing Schedule for USKP Period II/2026 Candidates
Candidates in the Tax Consultant Certification Examination (USKP) Period II/2026 are required to attend a briefing held by the Implementing Committee of the Tax Consultant Certification Organising Committee (Komite Pelaksana Panitia Penyelenggara Sertifikasi Konsultan Pajak/KP3SKP in Indonesian).
Accordingg to Announcement No. PENG-11/KP3SKP/VII/2026, the USKP Period II/2026 briefing will be held online via Zoom Meeting on Wednesday (5/8/2026) from 08.30 – 11.30 Western Indonesia Time (Waktu Indonesia Barat/WIB in Indonesian). Candidates may join the briefing via the link here.
"USKP candidates are required to attend a pre-examination briefing," stated KP3SKP in PENG-11/KP3SKP/VII/2026. (DDTCNews)
