Taxation of E-Commerce Trade

Recently, taxing e-commerce has been a controversial topic of discussion within government bodies of Southeast Asia jurisdictions. At the end of 2018, the Indonesian government finally issued a new mechanism to turn the intention to create the equality between businesses and e-commerce businesses in terms of taxation.
The government recently issued a guideline to impose taxes on online transactions done through e-commerce platforms/businesses following the newly issued regulation on taxation for e-commerce trade (Minister of Finance Regulation No. 210/PMK.010/2018 on Taxation of Trade Transaction Through Electronic Systems or E-Commerce (“MoF Reg 210/18”). The MoF Reg 210/18 is set to come into force on 1 April 2019.
While the MoF Reg 210/18 gives more clarity on the tax treatment for online transactions through e-commerce platforms, it seems that it will lead to more challenges as well. Moreover, dissemination of government policy generally takes three months in practice, thus we may expect some issues during the implementation of this new policy.
We have prepared the following Key Provisions of MoF Reg 210/18:
Tax Treatment |
MoF Ref 210/18 does not stipulate a new tax for transactions through e-commerce platforms. MoF Reg 210/18 provides guidelines to impose tax (i.e VAT and Luxury Sales Tax) on transactions done through marketplace platforms. |
Key Definitions |
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Taxpayer ID and VAT Treatment |
A Marketplace Platform Provider must have a taxpayer ID number/Nomor Pokok Wajib Pajak (NPWP) and must be stipulated as a taxable entrepreneur for VAT purposes. Meanwhile, a Seller and a Service Provider can either have a taxpayer ID number or an identification number (Nomor Induk Kependudukan/NIK). In addition, a Seller and a Service Provider are only required to be stipulated as a taxable entrepreneur for VAT purposes if their turnover exceeds IDR 4.8 billion.
Under MoF Reg 210/18, a Seller and a Service Provider are required to pay their income tax in accordance with the Income Tax Law. If a Seller or a Service Provider is a taxable entrepreneur for VAT purposes, they are also required to collect VAT, issue tax invoices and submit a monthly VAT return. A Marketplace Platform Provider is also required to collect VAT, issue tax invoices and submit a monthly VAT return in relation to its Marketplace Platform Provider service and/or other taxable services and goods it provides. |
Recapitulation Transaction Submission |
A Marketplace Platform Provider is obliged to submit a recapitulation of transactions done by sellers and service providers through its platform to the Director General of Tax. The recapitulation is reported as an attachment of its monthly VAT return. |
Customs Treatment |
The imposition of import duty and import taxes is differentiated as follows :
A Marketplace Platform Provider should register itself at the Customs Office where its import frequency is high. After securing Customs’ Registration Approval the Marketplace Platform Provider is obliged to :
Violation of certain obligations above may cause the Customs to suspend or revoke the Marketplace Platform Provider’s Registration Approval. Further, the MoF Reg 210/18 and Regulation 182 set out a different duty imposition on imported goods. For instance, Regulation 182 provides that import of goods with customs value up to FOB USD 75 (in one day) will be exempted from import duty and import taxes. Meanwhile MoF Reg 210/18 does not provide an exemption threshold of import duty and taxes. Therefore, import through a Marketplace Platform Provider that is registered in Customs may generate more duty and taxes collection, because the tax treatment should refer to MoF Reg 210/18. |
Conclusion: We are of the view that the issuance of MoF Reg 210/18 creates equality between offline/conventional businesses and online/e-commerce businesses and provides certainty on Indonesia’s e-commerce industry in regard to the tax enforcement. Nevertheless, we are still expecting more detailed regulations to address other issues that may arise in connection with the implementation of e-commerce taxation.
The article above was prepared by Marshall S. Situmorang (Partner).