Who doesn’t buy online? From toilet paper to washing machines, purchasing both luxuries and necessities from the convenience of our homes or offices is a daily occurrence. We spend millions each day with a simple ‘click’. Technology undeniably plays a major role in our routine activities and affects countless aspects of the financial sector. Currently, the emergence of financial technology (fintech) and e-commerce makes business easier to conduct. No doubt, e-commerce garners more headlines since it is an important new feature of the global and national economy. The unconventional and distruptive nature of e-commerce has prompted the Indonesian government to design a suitable tax protocol. Fair is fair, right? The government acknowledged the need to be able to identify and collect tax from taxable transactions that take place in cyberspace but still convey support to the industry’s growth.
At the end of December 2018, The Ministry of Finance issued Regulation Number 210/PMK.010/2018 on Tax Treatment on Commercial Transaction in Electronic System/E-commerce (the “E-Commerce Tax Regulation”), which comes into effect April 1, 2019. Under this regulation, the government does not set a new type and tax rate for e-commerce business actors. It only explains the taxation procedures for e-commerce in order to provide ease of administration for and encourage compliance by e-commerce business actors. Therefore, it is expected that the treatment of taxation towards e-commerce will be similar to those of conventional business.
The E-Commerce Tax Regulation imposes an e-commerce transaction with the same tax obligation as in a conventional business transaction. Under this regulation, the Government aims to provide clear definition and policies of tax in e-commerce transactions. Therefore, e-commerce business actors, such as online retail, classified ads, daily deals, and social media will be subject to provisions relating to VAT, Sales Tax on Luxury Goods (PPnBM), and income tax as set forth in the E-Commerce Tax Regulation.
Generally, the E-Commerce Tax Regulation will apply to:
The marketplace refers to any commercial business activity in an electronic system of goods and/or services inside the customs territory. The E-Commerce Tax Regulation requires the marketplace provider to:
- Own a Taxpayer Registration Number (Nomor Pemilik Wajib Pajak or NPWP);
- Be listed as a Taxable Entrepreneur (Pengusaha Kena Pajak or PKP); and
- Pay income tax in accordance with the prevailing income tax regulations.
- Collect, deposit, and report VAT and income tax on marketplace platform services;
- Report transaction recapitulation by Merchants or Service Providers.
The E-Commerce Tax Regulation requires any Merchant to:
- report its Taxpayer Registration Number (NPWP) to the Platform Provider (if the NPWP is not available, the Merchant can report its National Identity Number (NIK) to the Platform Provider);
- pay income tax in accordance with the prevailing income tax regulations
- be listed as a Taxable Entrepreneur (Pengusaha Kena Pajak or PKP), an entrepreneur whose annual revenue exceeds IDR 4,800,000,000 per year. If such an entrepreneur does not fall into the PKP category, he will be
imposed with a 0.5% tax rate.
- collect, deposit, and report Value-added Tax (VAT) in the amount of 10% of the Transaction Value or with an additional Sale of Luxury Goods Tax (Pajak Penjualan atas Barang Mewah).
- compose a report in the Annual Notification Letter (Surat Pemberitahuan Tahunan or SPT) of the VAT every period regarding the handover of taxable goods and/or services via the Platform Provider.
At SLF, we know it’s important we understand Indonesia’s new regulation and its impact on domestic e-commerce. After all, we don’t see any of us ‘clicking’ any less. If you have questions or need further clarification on how this tax affects your online presence, please contact us at SLF.
About the author:
Geoffrey Auryn Jaurissa
Geoffrey Auryn Jaurissa is a junior associate at Schinder Law Firm. He assists both Indonesian and foreign clients in a variety of corporate works, with primary focus on foreign direct investment. A keen sportsman, Geoffrey likes to spend his spare time practicing Wushu.