UMKM Tax PP 20/2026: 0.5% Final Rate, Now Without a Time Limit
Government Regulation 20/2026 reshapes UMKM final income tax: the 0.5% rate stays, the 7-year limit is removed, and CV & PT are excluded as new participants.
Effective 22 April 2026, the government enacted Government Regulation (PP) No. 20 of 2026, amending PP No. 55 of 2022. The regulation updates the rules on final income tax (PPh) for UMKM (micro, small & medium enterprises) — including who qualifies for the 0.5% rate and for how long. Here are the key points for business owners.
The 0.5% Rate Stays — With Adjustments
The good news: the 0.5% final income tax rate for UMKM has not been removed. Businesses with gross turnover up to Rp4.8 billion in a tax year can still use it. What changed is the time period and who is allowed to use it.
The Biggest Change: The 7-Year Limit Is Gone
Previously, an individual taxpayer could use the 0.5% rate for a maximum of 7 years. After that, they had to switch to the normal progressive income tax rate, with full bookkeeping obligations.
Under PP 20/2026, that time limit is removed for individual taxpayers. This means that as long as your business stays at UMKM scale (turnover below Rp4.8 billion), you can enjoy the 0.5% rate with no time limit. It is a relief for many small business owners who previously worried about their low rate expiring.
Who Qualifies for the 0.5% Rate?
PP 20/2026 narrows the eligible taxpayers. Eligible:
- Individual taxpayers;
- Individual companies (perseroan perorangan) founded by one person;
- Domestic cooperatives.
Meanwhile, business entities in the form of CV, Firma, Limited Liability Companies (PT), and BUMDes can no longer be new participants in the UMKM final-tax scheme. These entities are directed to use ordinary corporate income tax rules.
Income from Independent Professions Is Excluded
An important clarification: income from independent professional work cannot be subject to UMKM final income tax. This category includes, among others:
doctors, lawyers, accountants, consultants, architects, notaries, appraisers, actuaries, advertising agents, insurance agents, artists, athletes, coaches, moderators, as well as influencers, bloggers, and vloggers.
If your income comes from professional expertise or services like the above, the 0.5% scheme does not apply.
Anti–“Business Splitting” Rules
To prevent tax avoidance by splitting a business, PP 20/2026 stipulates:
- If one person owns several individual companies, all their turnover is combined. If the combined turnover exceeds Rp4.8 billion, all those entities lose the 0.5% facility the following year.
- The turnover threshold also combines the gross turnover of husband and wife together with the individual companies they founded.
Turnover up to Rp500 Million Remains Tax-Free
A favourable provision is retained: individual taxpayers with turnover up to Rp500 million per year are not subject to final income tax. The 0.5% rate only applies to the portion of turnover above Rp500 million.
What Does This Mean for Your Business?
- Individual UMKM owners generally benefit — the low rate is now permanent.
- CV or PT users should review their strategy, since they cannot be new participants in this scheme.
- Professionals and independent workers must ensure their income tax follows the general rules.
Every business is different. Misreading the rules can lead to underpayment or penalties.
Need Help Understanding the New Rules?
The Mandiri Pajak team is ready to help you assess the impact of PP 20/2026 on your business, calculate your obligations correctly, and file them on time. Explore our services or book a free consultation with our certified consultants — Correct Taxes, Peace of Mind.