MSME Taxpayers Need Not Apply for  Article 31E Income Tax Incentive

“The rate reduction incentive is implemented using self-assessment upon the filing of the Annual Income Tax Return for corporate taxpayers, thereby, resident corporate taxpayers do not need to apply,” reads SE-02/PJ/2015, quoted on Sunday (19/2/2023) ).

Pursuant to Article 31E, resident corporate taxpayers are entitled to a rate reduction or discount of 50% on taxable income which is part of the turnover of IDR4.8 billion.

If the turnover of the corporate taxpayer in 1 year does not yet reach IDR4.8 billion, the corporate taxpayer may pay corporate Income Tax at a rate of only 11% or half of the statutory rate of 22%.

Incentives under Article 31E of the Income Tax Law may be utilised mainly by MSME corporate taxpayers that have utilised the MSME final Income Tax scheme since 2018 and have been required to pay corporate Income Tax pursuant to general provisions.

Corporate taxpayers in the form of limited liability companies that have utilised the MSME final Income Tax scheme since 2018 are no longer allowed to use the final Income Tax scheme starting in 2021.

On the other hand, corporate taxpayers in the form of limited partnerships, firms and cooperatives that have utilised final Income Tax since 2018 must pay taxes pursuant to general provisions starting in 2022.

Corporate taxpayers wishing to utilise the Article 31E incentive need to provide a cross on Form 1771 Section B Number 4 letter c and calculate taxes pursuant to applicable regulations.

For example, PT Y’s gross turnover in the 2022 tax year was recorded at IDR4.5 billion with taxable income of IDR500 million. Considering that PT Y's turnover does not exceed IDR4.8 billion, all taxable income is subject to a rate of 50% of the applicable corporate Income Tax rate.

Thus, PT Y’s payable Income Tax in the 2022 tax year is IDR55 million. (rigs)