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Reduction of Income Tax rate for Small-Scale Business from 1% to 0.5%

On 8 June 2018, the Government issued a Regulation No. 23 year 2018 (“GR-23/2018”) regarding income tax on income received or earned by taxpayers having gross income up to certain amount. GR-23/2018 revokes the previous GR-46/2013. GR-23/2018 is effective from 1 July 2018.

GR-23/2018 is aiming to encourage the public to participate in formal economic activities by granting facility and justice to taxpayers having income up to a certain amount for a certain period.

The summary of the new regulation is as follows:

  • There is no change in the threshold of the category/ definition of “small-scale business”, i.e. a local taxpayer having income up to IDR4,800,000,000 per annum.

  • The income tax tariff is reduced from 1% to 0.5%. The type of tax is “final”.

  • The new regulation clearly stipulates that the taxpayer (individual or corporate) is allowed to adopt the normal tax regime (non-final tax) by submitting a notification to the Tax Office.

  • The new regulation provides clearer categories of income that are not subject to (excluded from) GR23/2018, i.e.:

  1. Income received by an individual taxpayer from services in respect of free employment e.g. lawyer, accountant, architect, doctor, consultant, notary, appraiser, actuary, singer, broker, etc.

  2. Income received or earned abroad for which the tax is payable or already paid abroad;

  3. Income already subject to final tax based on other provisions; and

  4. Income not subject to tax.

  • The new regulation limits the period for application of the 0.5% tax rate as follows:

  1. 7 years for individual taxpayers;

  2. 4 years for corporate taxpayers in the form of cooperative, partnership, or firm; and

  3. 3 years for corporate taxpayer in the form of limited liability company (Perseroan Terbatas).

Contact Information:

Hartiadi Budi Santoso – Partner, M: +62 (816) 850 258, E: hartiadi.santoso@gnv.id

Ahdianto – Partner, M: +62 (812) 100 4451, E: ahdianto@gnv.id

Rahadianto Sudewo – Partner, M: +62 (815) 991 0130, E: rahadianto.sudewo@gnv.id

Charles Oetomo – Partner, M: +62 (816) 786 811, E: charles.oetomo@gnv.id

IDM Agung Nugraha – Partner, M: +62 (818) 726 010, E: dewa.nugraha@gnv.id

Jeklira Tampubolon – Partner, M: +62 (811) 846 455, E: jeklira.tampubolon@gnv.id

Endy Arya Yoga – Partner, M: +62 (816) 197 1930, E: endy.yoga@gnv.id

Benjamin Simatupang – Director, M: +62 (816) 144 2486, E: benjamin.simatupang@gnv.id

Fabian Abi Cakra – Director, M: +62 (813) 103 14103, E: fabian.cakra@gnv.id

Julius Daryono – Director, M: +62 (818) 083-25781, E: julius.daryono@gnv.id

Aditya Wicaksono – Director, M: +62 (818) 462 644, E: aditya.wicaksono@gnv.id

Kitamura - Advisor – Japanese Desk, M: +62 (21) 2988 0681, E: info@gnv.id

Felic Setiawan – Director, M: +62 (821) 151 11228, E: felic.setiawan@gnv.id

Irma Batubara – Director, M: +62 (818) 0621 2548, E: irma.batubara@gnv.id

All information in the tax news or alert has been and is prepared in general terms only. The information is intended as a general guide and shall not be construed as any advice, opinion or recommendation given by GNV Consulting and/or its personnel (collectively “GNV Consulting”). The information is limited by the time available and by the information made available to us. You should not consider the information as being comprehensive, as we may not be aware of all facts or information. Accordingly, GNV Consulting is not in a position to and will not make any representation as to the accuracy, completeness or sufficiency of the information for your purposes.

The application of the content of the information to specific situations will depend on the particular situations involved. Professional advice should be sought before the application of the information to any particular circumstances and the information shall not in any event substitute for such professional advice.

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