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INDONESIA: E-Commerce Tax Regulations Rescinded

Moves to ensure the country’s online traders had the same tax obligations as more conventional businesses have been put on hold following a climbdown by the Finance Ministry. Under the terms of regulations that had been due to come into force on 1 April this year, any e-commerce business classified as a small and medium-sized enterprise (SME) was to pay corporate income tax (CIT) at a rate of 0.5%, while larger e-commerce operators were mandated to pay 25% CIT. In addition, all online businesses would have been obliged to obtain a tax identification number (NPWP), file self-assessed income tax returns and submit their accounts to the Finance Ministry. Those with an annual turnover of Rupiah4.8 billion (US$340,000) would have been further mandated to charge VAT on relevant products.

While announcing the cancellation of the requirements, Sri Mulyani Indrawati, the country’s Finance Minister, emphasised that e-commerce businesses remain subject to the country’s formal tax regime and must fulfil their tax obligations accordingly. A representative of the Indonesian E-Commerce Association (iDEA), meanwhile, has indicated that the regulations were withdrawn because enabling legislation by the country’s Director General of Taxation was not yet in place. This was, apparently, delayed by demands from the larger e-commerce platforms that smaller social media-based online businesses should face similar regulatory requirements.

Content provided by Picture: HKTDC Research
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