Indonesia has come to be considered one of the largest and most promising markets in the world. With a population of nearly 285 million, it holds huge potential economic power and has become an important target market for several countries, especially for consumer goods and electronics.
The economic development of Indonesia cannot be separated from the online shopping trend that is growing rapidly in the country. The convenience of merchandise searching, the variety of available products, and ease of payment have led Indonesians to buy even the simplest thing from online marketplaces. Individual entrepreneurs, SMEs, and large multinational enterprises are embracing e-commerce in the hope of expanding their market bases.
According to Ministry of Trade data, the gross merchandise value of Indonesian e-commerce reached $62 billion for 2023, up from $25 billion in 2019, and the number of e-commerce users in the country grew from 38.72 million in 2020 to 58.63 million in 2023. It is expected that the number of users will reach 99.1 million in 2029. The penetration level of e-commerce in 2023 was 21.56% and is expected to reach 34.84% in 2029.
Given its size and growth, e-commerce plays a significant role in Indonesian economics and taxation. Any change in e-commerce, including taxation, is therefore an interesting topic as there will be so many people and businesses affected in their daily transactions.
The government has cooperated with various digital platforms to develop a fair and comprehensive taxation programme. The sales data recorded automatically in the e-commerce system helps the Directorate General of Taxes in mapping the taxation potential accurately. Therefore, online sellers can no longer hide their business activities just because they are in the digital space.
In the future, it is possible that there will be an automatic withholding tax system for the marketplace, as has been implemented in the collection of VAT on foreign digital products. The policy direction clearly shows that all digital economic activities, such as local e-commerce, will be included in stricter and more systematic national tax coverage. Such government action aims to broaden the taxpayer base and increase Indonesia’s tax ratio, which has been stagnant for several decades. The country’s rapid development should be supported by a strong tax base as a source of development funding.
While the Trading through Electronic Systems (Perdagangan Melalui Sistem Elektronik, or PMSE) mechanism has been established under Government Regulation No. 80 of 2019, an implementing regulation for related taxation has not been issued. The Law of General Provision and Procedures of Taxation stipulates, in paragraphs (1) and (2) of Article 32A, that the minister of finance (MoF) appoints other parties to collect, deposit, and report the tax. The law further mandates the MoF to regulate such activities. Even though the legal basis was in place, however, an implementing regulation was still absent. Careful government analysis has been necessary, given that e-commerce encompasses individual, small, and medium enterprises that may be severely affected if the policy is implemented without due consideration.
1 The issuance of PMK-37/2025
After a lengthy regulatory absence, the MoF recently issued Regulation No. 37 of 2025 concerning the Appointment of Other Parties as Income Tax Collectors as well as Procedures for Collecting, Depositing, and Reporting Income Tax Collected by Other Parties on Income Received or Obtained by Domestic Traders with Trading Mechanisms through Electronic Systems (PMK-37/2025).
The publication of PMK-37/2025 on July 14 was in response to the dynamics within Indonesia’s marketplace ecosystem through the provision of facilities by trade organisers of the PMSE (Penyelenggara Perdagangan Melalui Sistem Elektronik, or PPMSEs). PMK-37/2025 is aimed at fulfilling the principles of legal certainty, fairness, ease, and simplicity of administration, as well as improving the efficiency and effectiveness of tax collection, particularly through the PMSE mechanism.
PMK-37/2025 is expected to smooth taxation compliance with PPMSEs’ and each merchant’s taxation obligations. Under PMK-37/2025, PPMSEs will be able to collect income tax from their merchants directly. In this regard, the burden of tax collection on domestic merchants lies on the PPMSEs as third or other parties appointed by the MoF.
2 Overview of the regulation
PMK-37/2025 states that domestic or foreign PPMSEs are liable to collect the income tax relating to domestic merchants’ sales under the category of Article 22 income tax.
2.1 The criteria for PPMSEs and merchants subject to the regulation
PPMSEs appointed by the minister as collectors of income tax shall have their domicile or be located (i) within the territory of the Republic of Indonesia or (ii) outside the territory of the Republic of Indonesia and fulfil certain criteria.
The criteria are as follows: PPMSEs that use escrow accounts to receive income from the PMSE mechanism and (i) have a transaction value with service providers offering electronic facilities for transactions in Indonesia exceeding a certain amount over a 12-month period, and/or (ii) have a level of traffic or access exceeding a certain amount in 12 months, which shall be stipulated by the MoF. The MoF may delegate the stipulation to the director general of tax (DGT).
The above threshold has not yet been established. However, as a comparison, we may reflect on the case of VAT in Director General of Taxes Regulation No. PER-12/PJ/2025 concerning the Threshold of Certain Criteria of Other Parties as well as the Appointment of Other Parties, Collection, Remittance, and Reporting of Value Added Tax on the Utilisation of Intangible Taxable Goods and/or Taxable Services from Outside the Customs Area Within the Customs Area through Trade via Electronic System in the Purpose of Implementing the Core Tax Administration System. In this regulation, the thresholds are as follows:
Transaction value – exceeds IDR 600 million within a 12-month period or IDR 50 million within a one-month period; and/or
Traffic amount – exceeds 12,000 accesses within a 12-month period or 1,000 accesses within a one-month period.
Regardless, the actual threshold will still have to wait for a DGT regulation to be issued.
A domestic merchant subject to Article 22 income tax collection should:
Receive income using a bank account or similar financial account; and
Conduct transactions using an internet protocol address in Indonesia or using a telephone number with an Indonesian telephone code (+62).
The domestic merchants term also encompasses shipping service companies or expeditions, insurance companies, and other parties that conduct transactions with buyers of goods and/or services through the PMSE mechanism.
2.2 Domestic merchants’ obligation to supply information to the PPMSE
Under PMK-37/2025, an in-scope domestic merchant is required to provide the following information to the relevant PPMSE prior to receiving income:
The tax ID.
The correspondence address.
A statement letter that the domestic merchant or individual taxpayer has gross turnover up to IDR 500 million, if applicable. This is to be resubmitted annually if the domestic merchant receives up to IDR 4.8 billion in one fiscal year. If the gross turnover exceeds IDR 500 million, the domestic merchant must resubmit the statement in the month when the threshold is exceeded.
A tax collection/withholding exemption decree (if any). The domestic merchant is required to resubmit for each new tax collection/withholding exemption decree obtained.
2.3 Article 22 income tax collection: rate, exemption, and treatment
The rate of Article 22 income tax collection is 0.5% of the gross income or sales generated by the merchant.
There are exemptions available based on the type of goods or services being traded, for a domestic merchant that has an exempt from collection decree, and for a domestic merchant or individual taxpayer with gross turnover not exceeding IDR 500 million in one fiscal year and that has already submitted the statement letter as described previously. Among the goods exempted are as follows:
Sales of phone credits/prepaid and starter packs; and
Sales of gold jewellery; gold bars; jewellery not made entirely of gold, gemstones, and/or other similar stones conducted by gold jewellery manufacturers, gold jewellery traders, and/or gold bullion entrepreneurs.
The Article 22 income tax collected may serve as a tax credit for domestic merchants subject to non-final tax and part of the final tax settlement for domestic merchants subject to final tax. If there is any underpayment of final tax, the domestic merchant should self-remit the underpayment and report it in the monthly unification tax return.
2.4 Miscellaneous administration for PPMSEs
PPMSEs should provide a system for generating invoices under the domestic merchant’s name that contains at least the following information:
A serial number and the date of the billing document;
The name of the PPMSE;
The account name of the domestic merchant;
The identity of the buyer of goods and/or services; that is, their name and address;
The type of goods and/or services, the total selling price, and any discount; and
The value of Article 22 income tax for the respective domestic merchant.
PMK-37/2025 gives PPMSEs the authority to determine the procedure for domestic merchants to submit the information referred to in 2.2 above. In this regard, PPMSEs may consider preparing a system to allow the domestic merchant to generate a statement letter, submit the relevant information and letters, and maintain records of these documents related to the implementation of PMK-37/2025.
PPMSEs should also submit certain information related to the domestic merchant, the buyer, and the transaction to the DGT.
2.5 Business anticipation
2.5.1 PPMSEs
The facilitation of Article 22 income tax collection, deposits, and reporting, as provided by PPMSEs to domestic merchants, is expected to improve and encourage tax compliance by PMSE merchants across the country. However, this new mandate requires PPMSEs to ensure they are capable of providing such facilities, including helping domestic merchants to prepare billing information on their transactions, as this type of document is among those that PPMSEs are now required to submit to the DGT.
Ultimately, it will be essential for PPMSEs, as the appointed third-party collectors of Article 22 income tax by the MoF, to become more accustomed with the procedures and compliance under PMK-37/2025, considering that non-compliance with the regulation may result in PPMSEs being penalised by the DGT.
2.5.2 Domestic merchants
Given that Article 22 income tax is considered a tax credit, domestic merchants should pay increased attention to managing their invoices as they are considered to constitute proof of Article 22 income tax collection. Missing invoices may result in the domestic merchant being denied the tax credit and they may be required to self-repay the Article 22 income tax.
Additionally, the nature of Article 22 income tax collection – i.e., an additional tax on top of the gross value – is different from withholding tax, which is withheld/reduced from the gross value. Article 22 income tax may result in an increased price of the goods or services purchased from the domestic merchant, which may alter the buyer’s activity, given that Indonesian e-commerce purchasers are well known for their price-sensitive behaviour. The merchants may consider adopting a new sales strategy to keep their customers.
3 Final thoughts on the impact of PMK-37/2025
The issuance of PMK-37/2025 provides important and long-awaited certainty, a level playing field, and fairness among merchants, whether they are e-commerce or offline based. This is set against a background of a growing perception in society that e-commerce merchants are not contributing fairly to tax payments. It is part of the government’s function to create a fair business environment, regardless of the platform, and the wait is now over.
