The Indonesian government has announced an extension of its reduced income tax rate for micro, small and medium enterprises (MSMEs) through the end of 2025, according to CNBC Indonesia.
Originally set to expire this year, the 0.5 per cent income tax rate—first implemented in 2018—will continue to apply to qualifying MSMEs as part of the government’s broader effort to support the sector.
Additionally, enterprises with annual revenues below IDR500 million (US$30,000) will continue to benefit from a zero per cent income tax rate. This includes informal businesses such as street food vendors.
Febrio Nathan Kacaribu, Head of Fiscal Policy at the Ministry of Finance, said the move aims to safeguard business continuity for millions of MSMEs across the country. “The extension is intended to help MSMEs maintain the sustainability of their businesses,” he stated.
The government has not indicated whether this will be the final extension of the scheme.
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MSMEs form the backbone of the Indonesian economy, accounting for over 60 per cent of the country’s GDP and employing the majority of the labour force. However, many remain financially vulnerable and are still recovering from the impacts of the COVID-19 pandemic and recent macroeconomic headwinds.
Digitalisation has emerged as a crucial strategy for growth among smaller enterprises, yet barriers such as cost and access to digital tools remain. The tax incentive is expected to alleviate some of these challenges.
Ryan Gondokusumo, CEO of Sribu, a platform that connects businesses with freelancers, welcomed the policy decision.
“The tax incentive will allow SMEs to invest in digital marketing and strengthen its online presence,” he said in a press statement. “Digitalisation is more than just a survival mechanism; it is a key for SMEs to thrive in this rapidly changing market.”
For many SME owners, particularly those operating in rural or informal sectors, digital marketing has remained out of reach due to limited budgets and technical capacity.
Stakeholders hope the extended tax benefit will provide room for reinvestment in essential areas such as online platforms, social media outreach and e-commerce infrastructure.
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