PP 20/2026: Can PT PMA Companies Still Use the 0.5% Final Tax in Indonesia?

Indonesia’s Government Regulation No. 20 of 2026 (PP 20/2026), effective from 22 April 2026, changed the eligibility rules for the 0.5% final income tax regime previously available to qualifying businesses with annual gross turnover not exceeding IDR 4.8 billion.

Under the new rules, ordinary limited liability companies (PT), including foreign-owned PT PMA companies, can no longer newly elect the 0.5% final turnover tax regime. The same restriction applies to CVs and firms.

However, PP 20/2026 does not necessarily remove the regime immediately from every company that was already using it. A PT or PT PMA that qualified for and applied the 0.5% rate before 22 April 2026 may generally continue until its existing eligibility period expires, subject to its circumstances and compliance history.

The practical distinction is therefore between:

- companies newly entering the Indonesian tax system after the regulation took effect;
- existing companies already within an approved 0.5% final-tax period; and
- companies whose eligibility period has ended and must move to the ordinary corporate income tax regime.

This distinction matters because the ordinary regime calculates tax on taxable profit rather than applying a fixed percentage directly to gross turnover.

Under PP 20/2026, the 0.5% final income tax regime remains available to qualifying:

- individual taxpayers;
- one-person limited liability companies (perseroan perorangan); and
- Indonesian cooperatives.

The relevant business must also satisfy the applicable conditions, including the annual gross-turnover limit of IDR 4.8 billion.

An ordinary PT, including a foreign-owned PT PMA, cannot newly enter the regime after 22 April 2026. A perseroan perorangan should not be confused with a PT PMA: it is a separate company form established by one eligible Indonesian individual.

A PT or PT PMA that was already using the 0.5% final tax before PP 20/2026 took effect may continue only until its existing eligibility period expires, provided it continues to satisfy the previous requirements. The regulation does not create a new or extended eligibility period for such companies.

Each company should therefore confirm its registration date, the date it first applied the final-tax regime and the remaining eligibility period before deciding how its corporate income tax should be calculated.

Once a PT or PT PMA is no longer eligible for the 0.5% final tax, it generally moves to Indonesia’s ordinary corporate income tax regime.

The key difference is the tax base:

- the 0.5% final tax is calculated directly on gross turnover; and
- ordinary corporate income tax is calculated on taxable profit after allowable business expenses and applicable fiscal adjustments.

The standard corporate income tax rate is 22%. However, this does not mean that a company automatically pays 22% of its turnover or even 22% of its accounting profit.

The company must calculate taxable income using its revenue records, deductible expenses, depreciation, fiscal corrections and any carried-forward tax losses permitted under Indonesian tax law. Expenses that are not adequately documented or are not connected with earning, collecting or maintaining taxable income may be disallowed.

Eligible domestic corporate taxpayers with annual gross turnover not exceeding IDR 50 billion may also qualify for the Article 31E facility. This provides a 50% reduction of the standard corporate tax rate for the proportion of taxable income attributable to turnover of up to IDR 4.8 billion.

The availability and calculation of this facility should be reviewed for each company. PT PMA status does not by itself determine the result: the company’s Indonesian tax residency, turnover, income, expenses and applicable tax treatment must all be considered.

Every PT and PT PMA should confirm its tax position before preparing its next corporate tax return or financial forecast.

The company should review:

- whether it was already applying the 0.5% final tax before 22 April 2026;
- when its existing eligibility period began and when it expires;
- whether its accounting system can calculate taxable profit under the ordinary corporate tax regime;
- whether revenue, expenses, assets and depreciation are properly recorded;
- whether business expenses are supported by valid invoices, contracts and payment records;
- whether tax losses or the Article 31E facility may affect the calculation;
- whether pricing, cash-flow forecasts and tax provisions should be updated; and
- whether its accountant or tax adviser has documented the basis for the selected tax treatment.

Companies moving from turnover-based taxation to profit-based taxation should not wait until the annual return is due. Incomplete bookkeeping or unsupported expenses may increase taxable income and make the transition more difficult.

Companies selling through appointed Indonesian marketplaces should also prepare for the 0.5% PPh Article 22 withholding mechanism beginning on 1 August 2026 and ensure that marketplace deductions are reconciled with their tax records.

Existing PT and PT PMA companies should also avoid assuming that the 0.5% rate continues automatically. Their remaining eligibility depends on their previous status and the applicable transition rules. A company-specific review is therefore advisable.

If the company is preparing for liquidation, its final tax returns, outstanding liabilities and NPWP deletion should be coordinated as part of the PT PMA closure process.

The financial effect of moving from the 0.5% final tax to the ordinary corporate income tax regime depends largely on the company’s profitability and the quality of its financial records.

Under the 0.5% regime, tax is payable on gross turnover even if the company has low profit or records a commercial loss. Under the ordinary regime, tax is generally based on taxable profit after allowable expenses and fiscal adjustments.

The practical impact may therefore differ:

- a company with high profit margins may pay more tax under the ordinary regime;
- a company with substantial legitimate operating expenses may have a lower taxable base;
- a loss-making company may have no corporate income tax payable for the relevant year, although filing and documentation obligations remain;
- a company with incomplete records may lose deductions and face a higher taxable profit; and
- an eligible company may reduce its effective tax burden through the Article 31E facility.

The change should therefore not be assessed by comparing 0.5% and 22% in isolation. Companies should model the result using actual revenue, deductible expenses, fiscal adjustments and any available tax facilities.

A company-specific calculation is particularly important before setting prices, declaring dividends, making shareholder distributions or preparing annual financial forecasts.

Foreign investors establishing a new PT PMA after 22 April 2026 should not base their business plan on access to the 0.5% final turnover tax.

From the beginning of operations, the company should be prepared to maintain accounting records and calculate taxable profit under the ordinary corporate income tax regime. This affects the initial budget, bookkeeping procedures, expense documentation and cash-flow planning.

Before or shortly after incorporation, a new PT PMA should:

- establish an accounting system suitable for profit-based taxation;
- separate company and shareholder transactions;
- retain contracts, invoices, receipts and payment records;
- document capital expenditure, assets and depreciation;
- forecast corporate income tax using realistic revenue and cost assumptions;
- review whether the Article 31E facility may apply; and
- include tax compliance costs in its operating budget.

PP 20/2026 does not necessarily make a PT PMA commercially unattractive. It changes the tax assumptions that investors should use when assessing the company’s expected costs and profitability.

The appropriate structure should therefore be selected based on the planned activities, investment requirements, ownership rules, licensing obligations and expected financial results—not solely on the availability of a simplified tax rate.

No. An ordinary PT, including a newly established PT PMA, cannot newly enter the 0.5% final turnover tax regime after PP 20/2026 took effect on 22 April 2026.

The company should instead prepare to calculate corporate income tax on taxable profit under the ordinary regime, subject to any applicable tax facilities and company-specific circumstances.

Possibly. A PT or PT PMA that was already eligible for and applying the 0.5% final tax before 22 April 2026 may generally continue using it until its existing eligibility period expires.

The company should verify when the period began, whether all previous eligibility requirements remain satisfied and whether any event has already ended its entitlement. PP 20/2026 does not grant existing companies a new or extended period.

No. Under the ordinary corporate income tax regime, the standard 22% rate is generally applied to taxable profit, not gross turnover.

Taxable profit is determined after allowable business expenses, depreciation, fiscal adjustments and any permitted carried-forward losses are taken into account. The final calculation may also be affected by available tax facilities, including Article 31E.

A qualifying Indonesian corporate taxpayer with annual gross turnover not exceeding IDR 50 billion may be eligible for the Article 31E facility.

The facility provides a 50% reduction of the standard corporate income tax rate for the proportion of taxable income attributable to turnover of up to IDR 4.8 billion. Eligibility and the calculation should be confirmed based on the company’s tax status, turnover and financial results.

A company with no taxable profit may have no annual corporate income tax payable under the ordinary regime. However, it must still maintain proper accounting records, submit the required tax returns and support the reported loss with valid documentation.

Subject to Indonesian tax rules, qualifying fiscal losses may also be carried forward and used against taxable income in subsequent years.

The company should verify whether it is still entitled to use the 0.5% final tax, identify the correct date for moving to the ordinary regime and review its accounting records before filing.

Revenue, expenses, assets, depreciation, contracts, invoices and payment evidence should be properly documented. The company should also obtain a company-specific calculation from its accountant or tax adviser instead of assuming that either the 0.5% or 22% rate applies automatically.