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Indonesia: Taxation on e-commerce transactions

26 October 2017

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The finance minister is planning to issue a new regulation concerning taxation on e-commerce transactions, including the applicable tax rate and the mechanism on how to collect the tax.

Back in 2013, the Directorate General of Tax (DGT) issued Circular Letter No. SE-62/PJ/2013 concerning the Confirmation of Provisions of Taxation on E-Commerce Transactions (Circular Letter). In general, the Circular Letter confirms which provisions under the taxation laws apply to taxpayers who conduct e-commerce transactions. "E-commerce" is defined as the trading of goods and/or services conducted by entrepreneurs and consumers through an electronic system. There is no further explanation on what an electronic system is, thus, reference may be made to the relevant regulations in the communications and informatics sector. The said regulations define an "electronic system" as a series of electronic devices and procedures for preparing, collecting, processing, analysing, storing, displaying, publishing, transmitting, and/or distributing electronic information.

Under the Circular Letter, a taxpayer conducting e-commerce transactions shall be subject to the following income taxes and VAT.

Income tax

Any additional economic capability received by a taxpayer, whether generated within Indonesia or overseas, which may be used for consumption or to add to the wealth of the taxpayer, in any name or form, inter alia but not limited to: (i) income from salaried and freelance works; (ii) income from business and activities; (iii) income from capital, in the form of movable or immovable assets, such as interests, dividends, royalties, rents, and profits from sales of assets or rights not intended for business; and (iv) other income shall be classified as an income, and thus subject to income tax under the Income Tax Law.

In consideration of the above, any income obtained by a taxpayer from e-commerce transactions conducted through an electronic system must also be subject to income tax. The amount of payable tax has to be calculated in accordance with the prevailing regulations.


Provisions in the VAT Law and its implementing regulations also apply for taxpayers who conduct e-commerce transactions. Under the VAT Law, VAT is imposed to, among others: (i) delivery of taxable goods/services within customs area by taxable entrepreneurs; (ii) importation of taxable goods; (iii) utilisation of intangible taxable goods and/or taxable services from outside the customs area to within the customs area; and (iv) exportation of tangible taxable goods and intangible taxable goods, and/or taxable services by taxable entrepreneurs. Further, sales subject to the luxury goods tax shall also apply for: (i) the delivery of taxable luxury goods by an entrepreneur producing the goods within the customs area in its business activities or works; and (ii) importation of taxable luxury goods.

Since e-commerce transactions involve the delivery of goods/services (including luxury goods), they are also subject to VAT and the sales on luxury goods tax (as applicable).

Karyadi Freddy Karyadi   Santoso Nina Cornelia Santoso

Freddy Karyadi ( and Nina Cornelia Santoso (, Jakarta
Ali Budiardjo, Nugroho, Reksodiputro, Law Offices
Tel: +62 21 250 5125

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