Ecommerce SMEs Face New Tax Regulation in Indonesia

New Indonesia tax regulations for online retailers

Indonesian SMEs will have to report their earnings to the government from now on. Source:

The Indonesian government plans to implement new tax regulation that will affect individuals and companies that generate revenue and profit through online retailing reports Tech Wire Asia.

Daniel Tumiwa, Chairman of Indonesian Ecommerce Association (idEA) confirmed the special economic package on ecommerce will allow SMEs to be charged a small percentage of tax by the government. The amount will be reasonable and smaller than the current tax rate that SMEs now pay offline. However, the exact rate has not been officially announced.

Anyone who owns an online shop – including those operating through Instagram and Facebook – will be subject to the new regulation.

In 2013, Indonesia’s Finance Ministry issued a regulation that placed a 1% income tax tariff on tax payers with an annual turnover below $363,636. SMEs with an annual turnover below $3.8 million obtain a 50% tax discount.

Transactions from small and medium sized businesses are difficult for Indonesian authorities to monitor as they operate without set regulations. Most of the SMEs are without legal entities or taxpayer identification numbers, which in turns means the businesses are also not protected.

There are approximately 50 million active SMEs operating in Indonesia, but not all small companies can afford to go online. The Indonesian government has also proposed initiatives that would aim to bring 2 million SMEs online within the next two years, with the goal of having 8 million SMEs online by 2018.

It is said that an official announcement of the exact rate should be announced in September after the first phase of the tax amnesty policy implementation, which will increase tax revenue in the future.

A version of this appeared in Tech Wire Asia on July 8. Read the full version here.