Finance Ministry Regulation No.120/PMK.010/2018 on Taxation of Trade Transactions through Electronic System (E-commerce), which was announced at the start of 2019, would originally come into effect per 1 April 2019. But just as sudden as it was announced last January, it was withdrawn at the end of March 2019.

The tax regulation required e-commerce merchants (sellers) in Indonesia to share data with tax authorities, thus boosting both value-added tax (VAT) and income tax revenue. Something that was misunderstood by many was that this new tax regulation did not introduce a new tax, nor did it introduce a different tax rate for e-commerce trade. Instead, it only aimed at strengthening e-commerce merchants’ compliance with existing tax regulations by forcing the nation’s online marketplaces or e-commerce platforms (such as Lazada or Tokopedia) to share data with tax authorities. Key data that would need to be shared was how much earnings each vendor has received when selling their products and services through the e-commerce platform.

For the Indonesian government the problem is that there are millions of micro, small & medium-sized entrepreneurs selling goods on these online platforms but do not pay VAT and income tax as many of these e-commerce merchants belong to the informal sector and therefore have no tax identification number (in Indonesian: Nomor Pokok Wajib Pajak or NPWP).

This article discusses the following:

Why the government had created the "e-commerce tax regulation" and why it was delayed
The significance of the e-commerce industry for the Indonesian economy
Reactions from stakeholders on the government's decision to delay the new regulation


Read the full article in the March 2019 edition of our monthly research report. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944



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