The Increase in Turnover Limits of Small Businesses

The annual turnover threshold of small businesses as a VAT-able Entrepreneur (“PKP”) was raised to Rp4,8 billion from Rp600 million which is stipulated in MoF Regulation No.197/PMK.03/2013 implemented on December 20th, 2013 and became effective starting 1 January 2014.

VAT Law stipulates that a person who makes a supply of Taxable Goods and/or Taxable Services except for those small entrepreneurs as defined by the MoF shall declare his business as PKP and shall collect, pay and report VAT payable. As per this PMK, businesses with a turnover not exceeding Rp4,8 billion a year may elect to be a “Non-PKP” and hence not required to carry out its VAT obligations.

This MoF Regulation is to encouraging Taxpayers with a turnover not exceeding Rp4,8 billion, increase their tax participation using Scheme Final Income Tax (“PPh” ) as stated in GR No.46 Year 2013.

Further, with this increase in the turnover threshold, small businesses that are “not- PKP” are no longer obliged to make a VAT Invoice and VAT monthly return. Hence, the cost of tax compliance will be lower. Taxpayers’ compliance and obligation are much easier with these measures as mentioned above.