UMKM Tax: Under Rp500 Million Is Exempt, but You Must Still File
Small businesses earning ≤Rp500M/year pay no income tax; above that a 0.5% final rate applies. But forgetting to file still costs Rp100K. Full rules here.
Many small-business owners assume “tax-exempt” means “no obligations at all.” This misunderstanding often ends in a fine. Let’s set the rules straight so your business stays safe.
The UMKM rate rules
- Turnover ≤ Rp500 million per year (individuals): exempt from income tax (0%) since 2025. The portion of gross turnover up to Rp500 million is not taxed.
- Turnover above Rp500 million up to Rp4.8 billion: subject to a 0.5% final income tax on gross turnover. This facility applies to individuals and certain resident entities.
- Turnover above Rp4.8 billion: no longer uses the 0.5% final rate, but the normal income tax provisions.
The 0.5% final rate makes life easier for small businesses because it’s calculated simply from turnover, without complex profit-and-loss bookkeeping.
Tax-exempt ≠ filing-exempt
This is the most commonly misunderstood point: even with no income tax due, small businesses must still file an annual tax return. The DGT has repeatedly stressed this.
If you forget or file late, the penalty is the same as for any taxpayer:
- Rp100,000 for an Annual Personal Return.
- Rp1,000,000 for an Annual Corporate Return.
So the “savings” from paying no income tax can vanish simply by forgetting to click “file.” (See also: late tax-return penalties.)
What often trips up small businesses
- Assuming turnover under Rp500 million means no filing at all.
- Not recording monthly turnover, making the Rp500 million or Rp4.8 billion threshold hard to prove.
- Paying the 0.5% final tax late for the months once turnover becomes taxable.
- Not keeping transaction records for reporting.
Safe steps for small businesses
- Record turnover every month—it underpins all your tax obligations.
- Keep filing the annual return even when exempt.
- Remit the 0.5% final tax on time once turnover passes Rp500 million.
- Get advice as the business approaches Rp4.8 billion—the tax scheme changes.
The Mandiri Pajak team supports small businesses in staying compliant without the hassle. Explore our services or discuss your situation.