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Tax Glossary
Firm splitting is the practice of breaking up a single business operation into multiple separate entities with the primary aim of avoiding or reducing tax liability. In the context of Indonesia's MSME Final PPh, firm splitting typically involves establishing several business entities (Sole Proprietor PTs, CVs, or placing the business under a spouse or family member) so that each entity's gross revenue stays below the IDR 4.8 billion annual threshold, preserving the 0.5% final rate for every entity. Article 57 paragraph (2) letter e of Government Regulation 20 of 2026 explicitly closes this loophole by requiring revenue aggregation of an individual taxpayer together with all Sole Proprietor PTs they own, as well as combined spouse revenue, before the threshold is evaluated.