Do UMKM businesses have to pay taxes? This question may have crossed the minds of many new entrepreneurs, especially since their businesses are still relatively small in scale.
Even though the scale of the business is small, tax obligations for UMKM (Micro, Small, and Medium Enterprises) must still be fulfilled according to the applicable regulations. However, many UMKM owners still feel confused when it comes to managing these obligations.
Indeed, there are many aspects to understand regarding UMKM taxes, from the types of taxes imposed, how to calculate them, to the reporting process which is often considered complicated.
To get a complete overview of UMKM taxes, including applicable regulations and tips to make them easier to manage, read the full article below.
Types of Taxes Commonly Applied to UMKM
Basically, the taxes applied to UMKM consist of several types, namely Final Income Tax (0.5%), Value Added Tax (VAT), and Regional Taxes. Here is the explanation for each type:
1. Income Tax (Final Income Tax 0.5%)
Based on Government Regulation No. 23 of 2018, UMKM businesses with gross annual revenue of up to IDR 4.8 billion are subject to a Final Income Tax (PPh) of 0.5%. The calculation is based on the total monthly turnover.
However, this final tax rate facility does not apply indefinitely. For business entities, the usage period is limited to three years, while CVs, cooperatives, or partnerships can use it for four years. Meanwhile, individual taxpayers can utilize this facility for up to seven years.
Once the period ends, UMKM must switch to the general taxation scheme according to applicable regulations.
2. Value Added Tax (VAT)
If a UMKM’s gross annual revenue exceeds IDR 4.8 billion, it can no longer be treated as a non-taxable entrepreneur (non-PKP). In this case, the business owner must apply to be registered as a Taxable Entrepreneur (PKP).
With PKP status, business owners must charge Value Added Tax (VAT) of 11% on the delivery of taxable goods or services. This regulation has been implemented since the issuance of the Tax Regulation Harmonization Law (UU HPP) in 2022.
3. Regional Taxes
Certain types of businesses—such as restaurants, hotels, entertainment venues, and parking services—are generally categorized as objects of regional taxes. This means the taxes are collected by the local government, not the central government.
The tax rates and types may differ from one region to another. Management and collection of these taxes are usually handled directly by the Regional Revenue Agency (Bapenda) in each area.
UMKM Categories as the Basis for Tax Imposition
UMKM status in taxation does not always apply only to individuals. In practice, small and medium-scale businesses can also operate as business entities with their own tax obligations.
It is important to understand that not every business automatically falls into the UMKM category. The assessment considers several factors, such as the amount of assets owned and total annual sales.
The official reference comes from Government Regulation No. 7 of 2021 concerning the Ease, Protection, and Empowerment of Cooperatives and Micro, Small, and Medium Enterprises.
According to this regulation, UMKM are classified based on business capital criteria and annual sales results.
| Criteria | Micro Business | Small Business | Medium Business |
|---|---|---|---|
| Business Capital | Maximum IDR 1 billion, excluding land and buildings used for business | More than IDR 1 billion – IDR 5 billion, excluding land and buildings used for business | More than IDR 5 billion – IDR 10 billion, excluding land and buildings used for business |
| Annual Sales | Maximum IDR 2 billion per year | More than IDR 2 billion – IDR 15 billion per year | More than IDR 15 billion – IDR 50 billion per year |
UMKM Groups Based on Tax Rates
Based on their tax rates, UMKM can also be divided into two categories:
1. UMKM with Certain Gross Income
Based on Government Regulation 23/2018 which was updated through Government Regulation 55/2022, UMKM businesses with gross turnover up to IDR 4.8 billion per year are entitled to use the Final Income Tax rate of 0.5% of gross income.
However, this rate can only be used for a certain period depending on the type of taxpayer:
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Individual Taxpayers: 7 years
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Business entities such as cooperatives, CV, or partnerships: 4 years
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Limited Liability Companies (PT): 3 years
The time period is calculated from the tax year when the taxpayer registers.
After the final tax period ends:
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Individual taxpayers will be subject to general tax rates under Article 17 paragraph (1) letter a of the Income Tax Law or may use the Norm Calculation of Net Income (NPPN) method.
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Corporate taxpayers such as cooperatives, CVs, partnerships, PTs, or BUMDes/BUMDesma follow Article 17 paragraph (1) letter b with provisions under Article 31E of the Income Tax Law.
Additionally, through Government Regulation 55/2022, individual taxpayers with certain gross turnover may receive a facility where part of their income is not subject to tax.
2. UMKM in the Form of Business Entities with PKP Status
For UMKM that operate as business entities or have obtained PKP status and record gross turnover above IDR 4.8 billion per year, there is still an opportunity to utilize the 0.5% final tax rate, but only within the limited period stated in Government Regulation 55/2022:
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Individual Taxpayers: 7 years
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Cooperatives, CV, or partnerships: 4 years
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Limited Liability Companies (PT): 3 years
After this period ends, corporate taxpayers must switch to the general corporate income tax rate of 22%, which has been in effect since 2022 as regulated in Government Regulation 55/2022.
Special provisions regarding corporate income tax adjustments for public companies (Tbk) are further regulated in Minister of Finance Regulation No. 40 of 2023.
How to Calculate UMKM Tax
To calculate UMKM tax, especially the 0.5% Final Income Tax, business owners can use the following formula:
Final Income Tax = Final Tax Rate × Gross Turnover
To better understand how the calculation works, here is an example:
Mr. Dian owns a catering business with a monthly turnover of IDR 50 million. This means his annual turnover reaches IDR 600 million.
Based on Government Regulation No. 55 of 2022, his business income is subject to a 0.5% final tax rate.
The calculation is as follows:
Final Income Tax = Final Tax Rate × Gross Turnover
Final Income Tax = 0.5% × IDR 600,000,000
Final Income Tax = IDR 3,000,000 per year or IDR 250,000 per month
How to Pay UMKM Tax
Currently, UMKM tax payments can be made easily online or through banks. Here are the steps:
1. Create a Billing Code
Before making a payment, you need to create a billing code first. The billing code for UMKM Final Income Tax can be generated through the Coretax system:
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Log in to your Coretax account
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Select the option to create a self-paid UMKM Final Income Tax billing code
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Use Tax Account Code and Deposit Type Code (KAP KJS) 411128-420
Billing codes can also be created through the Simple Recording menu available in Coretax.
2. Pay Through an ATM
Once the billing code is available, tax payment can be made through partner banks using ATMs or digital banking services.
Example of payment through a BCA ATM:
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Select Other Transactions
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Choose Payment
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Select MPN/Tax
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Select State Revenue
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Enter the billing code
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Confirm the payment
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Save the State Revenue Receipt (BPN) as official proof of payment
3. Pay Through Tax Deposit
After accessing the Coretax website, UMKM Final Income Tax can also be paid using Tax Deposit transfers. The steps are:
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Open the Coretax website
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Go to the Payment menu
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Select Transfer Request
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Choose the available Tax Deposit credit
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Select destination Taxpayer Account and obligation type Other
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Transfer to KAP KJS 411128-420
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Determine the tax period to be paid
Tips to Simplify UMKM Tax Management
To make UMKM tax management less complicated and time-consuming, consider applying these simple steps:
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Record monthly turnover regularly
Make it a habit to record all business income neatly. This helps simplify tax calculations and financial reporting. -
Use online tax applications
Take advantage of digital tax services connected to the Directorate General of Taxes to calculate, pay, and report taxes efficiently. -
Stay updated on tax regulations
Tax rules for UMKM may change over time. Always check official sources to ensure compliance with the latest regulations. -
Consult if you are unsure
If there are aspects you do not fully understand, consult a tax consultant or contact officers at the local tax office.
Understanding UMKM tax obligations is an important part of maintaining the sustainability of a business. With proper financial planning, tax obligations can be fulfilled without disrupting business cash flow.
However, running a business often comes with unexpected challenges, such as the need for additional inventory or expansion plans that require quick funding so that opportunities are not missed. In situations like this, reliable financing can help maintain your business momentum.
BFI Finance provides financing solutions with collateral such as motorcycle BPKB, car BPKB, or house/shop certificates, which can be adjusted to your needs. BFI Finance is licensed and supervised by the Financial Services Authority (OJK), making it a reliable funding option to support the growth of your UMKM in a more structured way.
So, there is no need to worry about developing your business because #SelaluAdaJalan with BFI Finance.
