Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

January 15, 2020
2020-5067

Indonesia issues e-commerce trading regulation

The Government of Indonesia issued Government Regulation No. 80 Year 2019 (GR-80) on 25 November 20191 to regulate several aspects of e-commerce trading including compliance, legal and tax considerations. GR-80 covers both transactions between business to business (B2B) and/or business to consumer (B2C).

While GR-80 is not a tax regulation, this Tax Alert highlights the potential tax impacts for international e-commerce businesses.2

Introduction of thresholds to deem physical presence for international e-commerce businesses3

International e-commerce businesses that actively offer and/or conduct e-commerce activities to consumers domiciled in Indonesia may be deemed to have a physical presence and carry out business activities in Indonesia if they exceed certain thresholds with respect to:

  1. Number of transactions
  2. Transaction value
  3. Number of shipping packages
  4. Amount of traffic or access

The thresholds are to be set by subsequent regulations. If the thresholds are exceeded, an international e-commerce business is required to appoint a tax representative in Indonesia.4 Any local and international e-commerce activities in Indonesia are subject to prevailing tax laws and regulations.

The impact of GR-80 is likely to be wide reaching and it is unclear how GR-80 will interact with the current Income Tax Law and in particular, the definition of permanent establishment. The impact will be assessed after the new Income Tax Law is finalized5 which is expected to contain other digital tax changes including the introduction of a value-added tax collection mechanism. International e-commerce businesses should closely monitor these developments and consider the impacts on business models.

Transition period

Any e-commerce businesses that have conducted e-commerce activities in Indonesia before the enactment of GR-80 must comply within two years after the effective date, i.e., by 25 November 2021.

Endnotes

1. GR-80 is the implementing regulation for Law No 7/2014 in relation to Trading and Trading Activities through Electronic Systems.

2. An international e-commerce business is broadly defined to include international merchants, international e-commerce platform providers and international intermediary services providers in the form of companies and individuals.

3. Key features remain unclear until the implementing regulations are released. The Minister of Finance will issue an implementing regulation to provide further detail, including the thresholds.

4. The process to appoint a representative is to be undertaken in accordance with prevailing laws and regulations (which are not yet released).

5. See EY Global Tax Alert, Indonesia announces plan for key tax changes, dated 10 September 2019.

For additional information with respect to this Alert, please contact the following:

EY Indonesia, Jakarta
Ernst & Young LLP (United States), Indonesia Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more