For those looking to establish a business presence in Indonesia in 2025, this guide covers the availability and main conditions attached to sole proprietorship (Usaha Dagang/Perorangan) status, including tax treatment and registration steps based on official published information.
Overview: Sole Proprietorship (Usaha Dagang / Perorangan) in Indonesia
Indonesia recognizes the sole proprietorship business model under the designation Usaha Dagang (UD) or simply Perorangan (individual business). This framework allows individuals to manage business activities and issue invoices without forming a limited liability company (PT), making it an efficient solution for freelancers, micro-entrepreneurs, and small traders.
Key Features and Requirements in 2025
| Category | Detail / Value |
|---|---|
| Status Name | Usaha Dagang (UD) / Perorangan |
| Eligible Individuals | Indonesian citizens (foreigners are not eligible for Perorangan status) |
| Separate Legal Entity | No; business and owner are not legally distinct |
| Business Activities | Permission to issue invoices and conduct commercial activity |
| Required Tax Registration | NPWP (Tax Identification Number) |
| When VAT Applies (PKP/PPN) | Annual turnover exceeds IDR 500,000,000 (approx. $33,600 at USD 1 ≈ IDR 14,900) |
| Special Tax Regime (For Micro & Small Business) | PP 23/2018: Final income tax of 0.5% on gross turnover |
| Annual Gross Turnover Limit for PP 23/2018 | IDR 4,800,000,000 (approx. $322,150) |
| Duration of Reduced Rate (Individuals) | Up to 3 years |
Taxation of Sole Proprietorships (Perorangan) in Indonesia
Sole proprietors in Indonesia are generally subject to two main tax obligations:
- Income Tax: Under the PP 23/2018 regime, businesses with annual revenue up to IDR 4.8 billion (approx. $322,150 USD) can benefit from a 0.5% final tax on gross turnover for up to three years. After this period or if the turnover threshold is exceeded, standard progressive rates will apply.
- Value-Added Tax (VAT/PPN): Required if annual turnover exceeds IDR 500 million (approx. $33,600 USD).
Summary Table: Main Tax Conditions
| Condition | Amount (IDR) | Amount (USD) |
|---|---|---|
| VAT Registration Threshold | 500,000,000 | $33,600 |
| PP 23/2018 Turnover Limit | 4,800,000,000 | $322,150 |
| Final Income Tax Rate (PP 23/2018) | 0.5% on gross turnover (≤ 4.8B IDR) | 0.5% on gross |
| Maximum Duration of PP 23/2018 for Individuals | 3 years | 3 years |
Note: Approximate USD conversions use a rate of 1 USD = 14,900 IDR and are provided for illustration only.
Registration and Administrative Process
Securing Usaha Dagang / Perorangan status is relatively straightforward for Indonesian citizens in 2025. The main step is registering for an NPWP (Tax Identification Number) through Indonesia’s Directorate General of Taxes. Businesses operating above the VAT threshold must also register for PKP status. The process is designed to be accessible for small players and side businesses.
Relevant Official Sources
Pro Tips for Managing Your Sole Proprietorship (2025)
- Register your NPWP as early as possible to unlock access to official invoicing and banking services.
- Carefully monitor your annual turnover. If you approach IDR 500 million ($33,600), prepare for VAT (PPN) obligations and compliance.
- If your business qualifies, leverage the PP 23/2018 regime for the first three years to minimize tax on gross revenue, but plan ahead for expiration of this benefit.
- Maintain clear records of gross sales and expenses, as tax audits focus heavily on documentation.
- Check regular updates from the Directorate General of Taxes, as policy adjustments on SME regimes are common.
Key Points to Remember
The Usaha Dagang / Perorangan status remains a practical choice for Indonesians seeking to conduct business without forming a company. With straightforward registration and a favorable tax regime for smaller businesses, it allows individuals to focus on operations with minimal bureaucracy. Remember that the 0.5% final tax regime is time-limited, and administrative thresholds for VAT registration can affect compliance obligations. Always refer to Indonesia’s official tax resources for the latest requirements and updates in 2025.