Indonesia officially enforces eCommerce tax rule in bid for fairer digital economy

Indonesia has officially launched a new policy requiring eCommerce platforms to act as tax collectors, marking a significant step in regulating the country’s fast-growing digital marketplace.

Finance Minister Sri Mulyani Indrawati (pictured) enacted the new directive under Regulation No. 37/2025, which came into effect on 14 July. The regulation empowers the directorate general of taxes (DJP) to appoint eCommerce players - such as Shopee, Tokopedia, Lazada, and Blibli - to collect income tax on behalf of merchants who sell through their platforms.

According to the regulation, the authority to appoint platforms and set transaction or traffic thresholds now lies directly with the DJP. “The minister delegates the authority to the director general of taxes to appoint other parties as tax collectors...,” reads article 7, paragraph 2 of the regulation.

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The rule applies only to domestic sellers who trade electronically via marketplaces and does not cover online ride-hailing services, gold traders, or prepaid phone credit sellers - categories explicitly excluded under the new provisions.

DJP spokesperson Rosmauli, speaking to Tempo in June, confirmed the ministry’s intention to expand digital tax collection. “The implementation of the regulation will follow the provisions set out in the Ministerial Regulation (PMK) once it is issued,” she said.

The DJP argues the policy levels the playing field between offline and online merchants. “Ultimately, this is expected to improve tax compliance among business actors,” Rosmauli added, pointing to the simplification of tax payment for MSMEs when income tax is withheld by marketplaces.

Under the policy, platforms that meet certain criteria must withhold and remit a 0.5% income tax on sellers earning between IDR 500 million (US$31,000) and IDR 4.8 billion (US$295,000) annually - figures previously reported by Reuters.

Hestu Yoga Saksama, director of income tax regulation I at the DJP, noted that the directorate had already engaged in discussions with major eCommerce platforms, which would require system adjustments. He added the DJP would first appoint large-scale online sales platforms, with smaller marketplaces to follow in later phases.

Economists and tax experts have welcomed the move cautiously. The National Research and Innovation Agency has welcomed the move, calling it both fair and necessary to level the playing field between digital and conventional businesses. Lead researcher Prof. Syahrir Ika said the government’s push to tax eCommerce transactions is part of a broader effort to strengthen state revenue, particularly given the scale of public engagement and state support these platforms have enjoyed.

Indonesia’s digital transaction value is expected to surpass IDR 700 trillion (US$43 billion) by 2025, yet Syahrir warned that much of this activity remains underreported - widening the fiscal gap between online sellers and their brick-and-mortar counterparts.

Similarly, Anisa Dwi Utami, an economist at IPB University, previously said that the regulation could address long-standing imbalances. “Before this policy took effect, there was an imbalance between offline business actors who paid taxes regularly and eCommerce actors who had not been optimally touched by tax obligations,” she said.

Utami said applying taxes such as VAT and income tax to eCommerce transactions is essential for both expanding the tax base and fostering fiscal justice. But she warned that without proper support, implementation risks becoming burdensome, particularly for MSMEs that dominate the digital sector.

She added that imposing a tax could drive up prices or reduce profit margins depending on whether sellers or consumers absorb the cost. There is also a potential social fallout. “Many digital entrepreneurs are individuals who are just starting a business or surviving amidst economic pressures. They can feel unfairly treated,” she explained.

To avoid backlash, she recommends a three-pronged approach: extensive education campaigns, the development of integrated tax reporting systems within eCommerce platforms, and tax incentives for small or new businesses.

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