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This is a Tax You Should Know If You Own a Small Business

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MSMEs Tax

What MSME tax means is the tax that Micro Small must pay and Medium Enterprises (MSMEs) by applicable tax regulations. MSMEs have to spend several taxes, including MSME Final PPh, PPh Article 21, and many more. In this article, read a full explanation of businesses that fall into the MSME category and the types of MSME taxes.

Businesses Entering the MSME Category Based on Law Number 20 of 2008

1. Micro Business Category

What is meant by micro business is an individual business unit or entity with fewer than four employees with an annual net worth of not more than 50 million Rupiah.

In addition, the sales turnover is also not more than 300 million Rupiah. The record that the land and buildings that are the place of business are not included in the calculation of net worth assets.

2. Small Business Category

The types of businesses that fall into the small business category are individual businesses or entities, not subsidiaries or branches of a company.

Usually, the number of employees is more than five, but less than 19. Annual sales turnover between IDR 300 million and IDR 2.5 billion with assets or net worth between IDR 50 million and IDR 500 million.

3. Medium Business Category

Suppose your business has a net worth of between 500 million and 10 billion Rupiah. In that case, your business is included in the Medium Business category mainly if the annual turnover ranges from 2.5 billion to 50 billion Rupiah and has more than 20 employees and less than 99 people.

4. Large Business Category

Large businesses are productive businesses run by business entities with a large number of employees, namely more than 100 employees.

His net worth assets are already more than 10 billion, and his annual sales turnover is more than 50 billion Rupiah.

Usually, this type of business is a go-public company with shares listed on the stock exchange, a State-Owned Enterprise, or it could also be a private company conducting business activities in Indonesia.

What taxes are SMEs subject to?

What taxes are SMEs subject to?

1. Income Tax Article 4 Paragraph 2

PPh Article 4 paragraph (2) is income tax that must be paid by business owners on land or building rental transactions, transfer of land/building rights, income from business services, and dividends paid to individuals.

2. PPh Article 21

PPh Article 21 is a tax that MSMEs must pay with employee income. If you are an MSME actor and have employees, You must deduct PPh 21 from wages, honoraria, and payments for work or services.

Then you need to deposit this PPh 21 deduction into the state treasury. Proof of PPH 21 beliefs can be given to employees.

3. MSME Final PPh PP 23/2018 or MSME Final Tax

MSME Final Tax or Final PPh is PPh on income from businesses received by taxpayers who have gross turnover, based on Government Regulation (PP) Number 23 of 2018.

The MSME Final Income Tax rate PP 23/2018 is 0.5% of gross turnover. It applies to individual and corporate taxpayers with a gross circulation of up to 4.8 billion in one year.

MSME Tax in force this year

Since Government Regulation Number 23 of 2018 (PP 23/2018) issuance, the MSME tax rate is 0.5% if the business turnover is at most 4.8 billion. This year, the MSME tax is still valid.

Even because of the past pandemic and the government is trying to improve the economy again after the pandemic, individual and corporate MSMEs are not subject to the MSME Final Income Tax as long as the turnover in one year is not more than 500 million Rupiah.

Example of UMKM Tax Calculation

Example of UMKM Tax Calculation

1. SMEs are not subject to tax

If your business turnover is approximately 10 million/month, then the total annual turnover is 120 million Rupiah in one year. Since the gross turnover is less than 500 million, you are not subject to final tax this year.

2. Taxable MSME

Meanwhile, if your business’s monthly turnover is 100 million, the total turnover in one year is 1.2 billion. So, your turnover exceeds the gross circulation limit of 500 million, so you have to pay MSME Final Income Tax of 0.5%

After knowing the categorization of MSMEs based on Law Number 20 of 2008 and the types of taxes for MSMEs, you can already calculate the MSME tax that you have to pay this year. If you still need additional information, you can also read The Latest MSME Tax Rules for 2023.

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