2026 Changes to the Indonesian Tax Regime

The cornerstone of the reform is Government Regulation No. 20/2026 (PP No. 20/2026). This regulation drastically alters the application of the preferential tax regime previously available to small businesses.

Previously, companies with an annual turnover under 4.8 billion IDR could pay a flat tax of just 0.5% on gross revenue. This significantly simplified tax administration and reduced the financial burden on small operations.

Starting in 2026, this regime is no longer available to the majority of corporate entities. The 0.5% flat tax option has been revoked for:

• Limited Liability Companies (PT)
• Limited Partnerships (CV)
• General Partnerships (Firma)
• Various other corporate structures

These entities are now legally required to transition to the standard corporate tax framework.

Following the elimination of the turnover-based regime, companies must now calculate their tax liabilities based on net taxable profit rather than gross revenue. The standard corporate income tax rate in Indonesia remains at 22%.

For many businesses, this shift mandates a more detailed and structured accounting of deductible expenses, revenues, and tax reliefs. While tax liabilities under the previous regime were easily predictable and tied solely to sales volumes, the tax burden is now determined entirely by the company's final financial results.

Despite revoking the 0.5% flat tax for most corporate forms, the government maintains fiscal support for small businesses through alternative frameworks.

Enterprises with an annual gross turnover of up to 50 billion IDR can utilize the tax relief provided under Article 31E of the Income Tax Law.

This provision grants a 50% corporate tax reduction applied to a specific portion of the taxable profit. This effectively lowers the operational tax rate for that portion of income to 11%.

As a result, the overall tax burden for small companies does not automatically spike. However, the calculation mechanics have become significantly more complex, requiring robust statutory bookkeeping and full accounting compliance.

Following the reform, the preferential final tax regime is restricted to a very limited pool of taxpayers.

This covers individual entrepreneurs, sole proprietorships (Perseroan Perorangan), and cooperatives, subject to statutory conditions.

Through this measure, the government has focused its fiscal support entirely on micro-enterprises and family businesses, effectively excluding the majority of structured corporate forms from the program.

Transitioning to the standard tax framework imposes more demanding financial reporting obligations on companies.

Corporate entities are now legally required to maintain comprehensive bookkeeping, prepare formal financial statements, calculate net taxable profits, remit monthly advance payments, and submit annual corporate tax returns.

Furthermore, if statutory criteria are met, businesses must register as VAT vendors and fully comply with all tax regulations regarding withholding taxes on salaries, dividends, and other distributions.

These structural updates directly impact foreign-owned enterprises (PT PMA). Previously, small-scale foreign businesses frequently utilized the 0.5% turnover tax option, but this is no longer legally permitted.

Foreign enterprises must now apply the standard corporate income tax at a rate of 22% on net profits. Additionally, outbound dividend distributions to non-resident shareholders trigger domestic withholding tax rules, unless reduced rates are provided under an applicable Double Taxation Agreement (DTA).

Another critical component of the tax reform is the implementation of the global minimum tax framework (Pillar Two). For large multinational enterprise (MNE) groups, the effective corporate tax rate must not fall below 15%.

This means traditional tax holidays and investment incentives may no longer entirely eliminate tax liabilities. If a subsidiary's effective tax rate drops below this international minimum, a domestic top-up tax obligation will apply.

The 2026 tax reform shifts the entire foundation of corporate taxation in Indonesia. While the primary advantage for small businesses was previously the extreme simplicity of turnover calculations, the fiscal focus has moved entirely toward comprehensive accounting and net profit taxation.

For entrepreneurs, this mandates an immediate review of corporate structures, financial record-keeping, and forward-looking tax planning. At the same time, the retention of tax reliefs under Article 31E allows smaller enterprises to partially mitigate the increased tax burden.

Overall, these updates demonstrate Indonesia's intent to align its domestic tax framework with international benchmarks, increase transparency, and establish a more sustainable corporate tax model while preserving support for true micro-entrepreneurship.

In 2026, the Directorate General of Taxes (DJP) finalized the implementation of its unified digital platform, CoreTax (SIAP).

The primary operational features of this integrated institutional platform include:

• Annual Tax Returns: The 2026 calendar year marks the first period where all corporate and individual taxpayers submit annual tax returns (SPT) exclusively via CoreTax. For the 2025 corporate tax year, the statutory filing deadline was successfully processed on 30 April 2026.
• Real-Time Data Processing: The system processes electronic invoices (e-Faktur) and withholding tax slips (e-Bupot) in real time. This operational data is automatically populated into the taxpayer's digital profile, pre-filling a significant portion of the annual tax return information.
• Automated Risk Mitigation: CoreTax automatically detects financial discrepancies prior to final submission. For instance, if declared corporate expenses contradict withholding tax records or historical VAT filings stored in the central database, CoreTax flags the non-compliance error immediately.