Feeling overwhelmed by complex tax systems and endless paperwork? If you’re an entrepreneur or digital nomad considering Indonesia as your next base, you’re not alone. Many independent professionals are searching for straightforward, low-burden ways to operate legally while minimizing state interference. In 2025, Indonesia’s sole proprietorship regime—known as Usaha Dagang (UD) or Perorangan—offers a refreshingly accessible path. Here’s a data-driven breakdown of how it works, who it benefits, and how you can optimize your tax position.
Understanding Sole Proprietorship in Indonesia: Usaha Dagang (UD) / Perorangan
Indonesia recognizes the Usaha Dagang (UD) or Perorangan status for individuals who want to run a business without forming a separate legal entity like a limited liability company (PT). This status is widely used by freelancers, small traders, and service providers who value simplicity and autonomy.
Key Features at a Glance
| Feature | Details (2025) |
|---|---|
| Status Name | Usaha Dagang (UD) / Perorangan |
| Legal Entity Required? | No (individual status) |
| Registration Process | Simple, accessible to citizens |
| Tax ID (NPWP) Required? | Yes |
| VAT Registration Threshold | IDR 500 million/year (approx. $31,500) |
| Special Tax Regime | PP 23/2018: 0.5% final tax on gross turnover up to IDR 4.8 billion/year (approx. $302,000), for up to 3 years |
How to Register and Operate as a Sole Proprietor in Indonesia
Setting up as a sole proprietor in Indonesia is refreshingly straightforward. Here’s how you can get started and optimize your tax position:
Pro Tip 1: Register for a Tax Identification Number (NPWP)
- Visit the official tax office website or your local tax office.
- Submit your personal identification and business details.
- Receive your NPWP, which is mandatory for all business activities.
Pro Tip 2: Leverage the PP 23/2018 Tax Regime
- If your annual turnover is up to IDR 4.8 billion (approx. $302,000), you qualify for the PP 23/2018 regime.
- Pay a flat 0.5% tax on your gross turnover—no complex deductions or audits.
- This regime is available for up to 3 years for individuals, making it ideal for new ventures and micro-businesses.
Pro Tip 3: Monitor Your VAT Threshold
- If your annual revenue exceeds IDR 500 million (approx. $31,500), you must register for VAT (PKP).
- Stay below this threshold if you want to avoid additional compliance and reporting requirements.
Mini Case Study: Freelancer in Bali
Imagine a freelance web developer based in Bali earning IDR 400 million (approx. $25,200) in 2025. By registering as a Perorangan and opting into the PP 23/2018 regime, their total tax bill is just IDR 2 million (approx. $126) for the year—no corporate filings, no complex audits, and minimal state intrusion.
Summary: Why Indonesia’s Sole Proprietorship Status Works for Digital Nomads
- Low administrative burden: Simple registration and compliance.
- Predictable, low tax rates: 0.5% on gross turnover for qualifying businesses.
- Flexible for small-scale operations: Ideal for freelancers, consultants, and micro-entrepreneurs.
- Clear thresholds: Know exactly when VAT registration is required.
For more details, consult the official resources:
- Indonesian Tax Office: UMKM
- OSS: UMKM Business Classification
- Online Pajak: Types of Business Entities
- PP 23/2018 Regulation
Indonesia’s sole proprietorship regime in 2025 remains one of the most accessible and entrepreneur-friendly options in Southeast Asia. With the right approach, you can minimize your tax burden and maximize your independence.