E-Commerce Business Indonesia: New Tax Tariff for Online Retailers?
Indonesia plans to introduce a special tax regulation for those small and medium-sized enterprises that generate revenue and profit through online retail sales (e-commerce business). Daniel Tumiwa, Chairman of the Indonesian E-commerce Association (idEA), informed reporters about the government's plan. He added that only a small tax tariff will be charged on small and medium-sized e-commerce companies. The new regulation is expected to be implemented later this year.
The new regulation implies that those individuals and companies that generate revenue and profit through online retailing (including sales through Facebook or Instagram pages) are required to report their income and fulfill their tax obligations.
In general, a corporate income tax rate of 25 percent applies in Indonesia. Small and medium-enterprises with an annual turnover below IDR 50 billion (approx. USD $3.8 million) obtain a 50 percent tax discount (imposed proportionally on taxable income of the part of gross turnover up to IDR 4.8 billion). In 2013, Indonesia's Finance Ministry issued a regulation that set a one percent income tax tariff on individual and institutional taxpayers with an annual gross turnover below IDR 4.8 billion (approx. USD $363,636).
However, the main problem for Indonesian authorities is that it faces difficulties to monitor transactions of the nation's small and medium-sized businesses. Most of these businesses do not have legal entities or taxpayer identification numbers (NPWP).
Read more: Tax Amnesty Program of Indonesia Launched
Meanwhile, the idEA estimates that Indonesia's e-commerce retailers see an increase of at least 30 percent (y/y) in income during the Idul Fitri holiday (4 - 8 July 2016) as it detected a shift in consumer behavior. According to the idEA an increasing amount of Indonesian consumers prefer to shop online rather than visit offline stores.