The final income tax rate of 0.5 percent is often understood as a "light" rate. It is indeed light, as long as the business is profitable. When the business incurs losses, the calculation is different: the tax remains payable because the basis for assessment is gross revenue, not profit. This article discusses when the option of the general rate with bookkeeping should be considered, and what needs to be checked before making a decision.
Basis for assessment: revenue, not profit
PP 55/2022 as amended by PP 20/2026 establishes the final income tax on income from domestic taxpayers with a certain gross revenue. The General Explanation of this regulation states that the calculation is based on the gross revenue received or obtained. This means that rental costs, raw materials, and salaries do not reduce the tax paid.
As an illustration (fictional figures), an individual entrepreneur with a revenue of Rp800 million per year and costs of Rp900 million incurs a loss of Rp100 million. With the final scheme, he still pays 0.5 percent on the revenue exceeding the first Rp500 million, which amounts to Rp1.5 million.
Another option: general rate with bookkeeping
Article 57 paragraph (2) letter a of PP 20/2026 exempts taxpayers who choose to be taxed based on the general rate of Article 17 of the Income Tax Law (UU PPh). With this option, the tax is calculated from net income, so in the previous illustration, the tax for that year would be zero.
The biggest difference lies in the compensation of losses. Article 6 paragraph (2) of the Income Tax Law states that losses can be compensated with income starting from the following tax year, consecutively for up to 5 years. According to DDTC's explanation, this right is only held by taxpayers who maintain bookkeeping, not those whose income is entirely final or uses norms.
Continuing the illustration: in the following year, the business profits Rp60 million, and then Rp80 million after that.
| Year | Fiscal profit/loss | Loss used | Remaining loss | Taxable income |
|---|---|---|---|---|
| 1 | loss Rp100 million | 0 | Rp100 million | 0 |
| 2 | profit Rp60 million | Rp60 million | Rp40 million | 0 |
| 3 | profit Rp80 million | Rp40 million | 0 | Rp40 million |
Any unused losses after the fifth year expire. For certain capital investments, PP 18/2015 can extend the period to up to 10 years, but this is a conditional facility, not a general right.
Conditions and traps of choosing the general rate
Article 57 paragraph (3) requires notification to the Director General of Taxes, and paragraph (5) delegates the procedure to the Ministerial Regulation. The DJP press release regarding PMK 164/2023 states that the notification must be submitted no later than the end of the tax year, and the general rate will only apply in the following tax year. Since PP 20/2026 was issued afterward, ensure with the KPP whether the procedure remains the same.
Article 57 paragraph (4) refers to paragraph (3), so this option should be treated as a one-way decision. Bookkeeping also requires neat and orderly records. If the business is almost certain to be profitable from the start, the final scheme is often simpler. If a loss period is expected to continue, bookkeeping should be considered.
If you prefer to see the explanation directly, there is a video clip explanation on the video page.
Sources
- PP Number 20 of 2026 concerning Amendments to PP Number 55 of 2022 (text and explanation), State Secretariat.
- Law Number 36 of 2008 concerning Income Tax, Directorate General of Taxes.
- DJP clarifies technical regulations for MSME taxes (PMK 164/2023), Directorate General of Taxes.
- Example of calculating fiscal loss compensation, DDTCNews.
- PP Number 18 of 2015 concerning Income Tax Facilities for Capital Investments, peraturan.go.id.