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Indonesia puts eCommerce tax on hold, more prep needed for implementation

Indonesian finance minister Sri Mulyani Indrawati has told local press that she is withdrawing her decision to implement PMK 210/2018, a regulation to tax eCommerce transactions that was first announced in January. The rules was retracted on 1 April, the day in which it was supposed to take effect.

In news reports by KrASIA and Jakarta Post, Indrawati had explained that putting the regulation on hold will ensure better coordination between related parties so that the taxation is targeted, fair, efficient, and can boost the growth of the digital economy in Indonesia.

The move comes after what appears to be “confusion” among the public, perceiving that the new regulation was specifically targeted at online transactions. However, that is not the case and Indrawati emphasised that digital businesses are subjected to prevailing tax regulations.

Additionally, the retraction gives the government more time to prepare the eCommerce data reporting infrastructure.

Indeed, the PMK 210/2018 appears to be a huge undertaking that requires much work back-end. Previously, the regulation was said to apply to all eCommerce transactions including those made through online retailers, social media, or classified advertisements. However, it does not address the tax treatment of activities of foreign-based companies in Indonesia.

In February, KPMG Advisory Indonesia commented in an analysis on its website, “Most of the tax and import duty reporting responsibilities rest on the marketplace platform provider because other eCommerce platform providers would not have any information about the transactions conducted through their platforms.”

It added that under the regulation, all marketplace platform providers must:

  • obtain a tax identification number (TIN) and be classified as a “taxable entrepreneur” even when they still qualify as small-scale entrepreneurs;
  • provide their TINs to the marketplace platform provider, and if they are taxable entrepreneurs, must impose VAT on their eCommerce transactions and issue the related tax invoice;
  • and prepare a summary of all transactions made through its platform and attach that summary with its monthly VAT report.

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