Indonesian government backtracks on new e-commerce tax regulation

The new regulation was supposed to kick in today.

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Indonesian government backtracks on new e-commerce tax regulation

In January, Indonesian finance minister Sri Mulyani Indrawati released a set of new tax rules, called PMK-210, for commercial trading that uses electronic systems. Those regulations were supposed to take effect today. However, the minister has decided to retract the rules.

The Indonesian government explained this development as a buffer to ensure that the Ministry of Finance can coordinate with the relevant institutions. In addition, the government will be discussing this matter with all stakeholders, including industry players like online marketplaces and e-commerce platforms.

PMK-210 is often misinterpreted by the public as a new tax on e-commerce players, leading to complaints and the spread of misinformation.

“I decided to withdraw PMK 210/2018, therefore there won’t be any new e-commerce tax regulation on April 1,” Indrawati told local press at her office.

She explained that better coordination between the related parties will ensure the e-commerce tax regulation is targeted, fair, efficient, and can boost the growth of the digital economy in Indonesia. The government will also have more time to prepare e-commerce data reporting infrastructure. Minister Indrawati also emphasized that Indonesia’s tax authorities will prioritize cooperation with and guidance for taxpayers, especially micro and small business, to increase their capacities and capabilities in marketing, access to credit, and business development.

The country’s central bank, Bank Indonesia (BI), recently revealed that transactions on online trading sites can reach IDR 11 to 13 trillion (USD 773 to 913 million) every month. BI aims to take advantage of this rapid growth by helping micro, small, and medium enterprises with exporting their products.

Under PMK-210, all sellers or merchants on online platforms must have a taxpayer number (NPWP). Sellers with profits under IDR 4.8 billion (USD 337,000) per year are subjected to a flat 0.5% tax rate. Those whose profits are higher will be designated as taxable entrepreneurs (PKP) and will have to follow valued-added tax (VAT) rules.

The regulation also demands marketplace platforms to become a tax deposit agent, which in effect makes them an extension of the Directorate General of Taxes with duties to collect, record, and deposit tax data for the government.

With the revocation of PMK-210, electronic merchants and retail platforms will receive the same tax treatment as their brick-and-mortar counterparts for the time being.

Editor: Brady Ng