Government Plans to Extend 0.5% Final Income Tax Incentive for MSMEs Until End of 2025

The government is currently drafting technical regulations to extend the application of the 0.5% final income tax (PPh) rate for micro, small, and medium enterprises (MSMEs) through the end of this year.

This tax incentive was originally implemented under Government Regulation (PP) No. 23 of 2018, later amended by PP No. 55 of 2022. According to those provisions, the 0.5% final income tax rate was set to expire by 2025.

However, Head of the Fiscal Policy Agency (BKF) at the Ministry of Finance, Febrio Nathan Kacaribu, confirmed that MSMEs can still benefit from the 0.5% rate during 2025 while the new regulation is being finalized.

“The government is in the process of drafting the regulation, but in the meantime, MSMEs are still allowed to apply the 0.5% tax rate in 2025,” said Febrio at a press conference on the state budget, held at the Finance Ministry headquarters in Jakarta, Friday (2/5/2025).

He emphasized that this relaxation is intended to ensure the smooth continuation of MSME operations.

“This is to ensure that MSME businesses are not disrupted,” he added.

Earlier, Minister of Cooperatives and MSMEs, Maman Abdurrahman, revealed that he had reached an understanding with Finance Minister Sri Mulyani Indrawati regarding the extension of this final income tax incentive.

“The technical discussions have been aligned; I will follow up directly with Minister Sri Mulyani,” said Maman during a visit to the Coordinating Ministry for Economic Affairs, Thursday (28/11/2024).

Maman stated that both ministries are aligned in their efforts to ease the burden on MSMEs amid current economic challenges through fiscal incentives.

He stressed that both sides would prioritize policies that support MSME activities, although the exact technical details have yet to be finalized due to the absence of a formal follow-up meeting.

“In principle, the resulting policy must not place an undue burden on MSMEs,” Maman concluded.