The MoF issued regulation No. 164 of 2023 (“PMK-164”) on 29 December 2023 concerning Income Tax Procedures for Small-Medium Enterprise (“SME”) Taxpayers and the Obligation to Register as a VATable Entrepreneur.

It has been widely known that SME Taxpayers are generally subject to a special final tax regime of 0.5% under Government Regulation no. 23 of 2018. Several implementation guidelines have been issued by the MoF and the DGT to administer this specific regime. Salient changes brought up by PMK-164 related to the previous procedures are as follows:

1. Taxpayers that choose to be subject to Income Tax based on the normal income tax regime should submit notification by no later than the end of the Tax Year, and the normal income tax regime will start effective from the following Tax Year. Meanwhile, for a newly registered Taxpayer, the notification should be submitted during the registration and the normal income tax regime shall start from the Tax Year of the registration;
2. Specifically for Individual Taxpayers, the portion of gross annual turnover up to IDR 500 million is not subject to income tax. This threshold will be applicable as well for the spouse of a married individual if they have a prenuptial agreement or if the wife chooses to perform her tax rights and obligations separately; and
3. For VAT purposes, PMK-164 also changes the VAT registration deadline for Taxpayers whose gross income exceeds IDR 4.8 billion to the end of the Tax Year. Previously, such Taxpayers should be registered by the end of the following month after the threshold is exceeded.

Through the issuance of PMK-164, the MoF revoked Regulation No. 99 of 2018 (“PMK-99”) and some articles of MoF Regulation No. 197 of 2013 (“PMK-197”). This new MoF regulation became effective from 29 December 2023. However, a specific transitional period applies for certain Taxpayers that choose to apply the normal income tax regime starting from Tax Year 2022. In addition, Taxpayers that earn a month-to-date gross income greater than IDR 4.8 billion by November 2023 and have not been confirmed as VATable Entrepreneurs will also be subject to the stipulation of PMK-164.