Small businesses in Indonesia with yearly earnings below IDR 500 million (US$30,000) will keep enjoying a zero percent income tax rate.
The Indonesian government has decided to keep the lower income tax rate for micro, small, and medium businesses (MSMEs) until the end of 2025, according to CNBC Indonesia.
The 0.5% income tax rate, which was supposed to end this year, will still apply to eligible MSMEs. This tax rate, introduced in 2018, is part of the government’s plan to support small businesses.
Also, businesses with yearly earnings under IDR 500 million (US$30,000) will still have a zero percent income tax rate. This includes informal businesses like street food vendors.
Febrio Nathan Kacaribu, the Head of Fiscal Policy at the Ministry of Finance, said the decision is meant to help millions of MSMEs in Indonesia keep their businesses running. He added, “The extension is meant to support MSMEs in maintaining their business stability.”
The government has not said if this will be the last time the scheme is extended.
MSMEs are a key part of Indonesia’s economy, making up more than 60% of the country’s GDP and providing jobs for most of the workforce. However, many of these businesses are still struggling financially and are working to recover from the effects of the COVID-19 pandemic and recent economic challenges.
Digitalization has become an essential way for small businesses to grow, but challenges like the cost and access to digital tools are still a problem. The tax incentive is expected to help ease some of these difficulties.
Ryan Gondokusumo, CEO of Sribu, a platform that links businesses with freelancers, praised the policy decision.
He said in a press statement, “The tax incentive will help small businesses invest in digital marketing and improve their online presence. Digitalisation isn’t just about surviving it’s essential for small businesses to grow in this fast-changing market.”
For many small business owners, especially those in rural areas or informal sectors, digital marketing has been too expensive and difficult to manage because of limited budgets and technical skills.
Stakeholders hope the extended tax benefit will give small businesses the opportunity to reinvest in critical areas like online platforms, social media, and e-commerce tools.
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