Marketplaces or e-commerce platforms (PPMSE) that meet thresholds of transactions, traffic, and escrow usage.
The Indonesian government has issued PMK 37/2025: E-Commerce Platforms as Income Tax Collectors in Indonesia, a landmark regulation that reshapes digital taxation. Under this rule, e-commerce platforms meeting certain thresholds are formally appointed as income tax collectors, shifting the responsibility from individual sellers to large digital marketplaces. This move ensures fair tax compliance, strengthens state revenue, and aligns Indonesia with global digital economy standards.
This regulation introduces a clear and binding mechanism under which e-commerce platforms—referred to as “Other Parties” (Pihak Lain)—are formally appointed as income tax collectors for transactions conducted by domestic sellers through electronic systems. Rather than imposing a new tax, PMK 37/2025 restructures the collection method, shifting responsibility from individual sellers (who frequently fell outside the formal tax net) to platforms with robust technological and financial systems. This structural shift is designed to improve administrative efficiency, transparency, and compliance within Indonesia’s rapidly expanding digital market.
The legal foundation for PMK 37/2025 rests in the Income Tax Law, as comprehensively amended by the Harmonized Tax Law (Law No. 7/2021). The HPP Law empowers the Minister of Finance to regulate new methods of tax collection, including the delegation of withholding functions to entities other than conventional taxpayers. It also introduces the principle of “significant economic presence”, reflecting Indonesia’s adoption of global reforms that emphasize economic substance over physical presence in determining tax obligations.
Before PMK 37/2025, the government attempted to regulate e-commerce taxation through PMK 210/2018, which primarily addressed VAT obligations for digital goods and services. While useful, these rules did not provide a systematic framework for income tax collection on transactions between domestic sellers and consumers via online platforms. This gap resulted in uneven compliance: many micro, small, and medium enterprises (MSMEs) selling online were not captured by the self-assessment system, while larger players faced inconsistent obligations. PMK 37/2025 remedies this deficiency by appointing e-commerce platforms as direct withholding agents under Article 22 of the Income Tax Law, thereby ensuring stronger enforcement.
PMK 37/2025 regulates the appointment of marketplaces and other electronic system operators (PPMSE) as withholding agents (pemungut) of Income Tax Article 22 in respect of transactions undertaken by domestic sellers (Pedagang Dalam Negeri). The regulation establishes procedures for the collection, remittance, and reporting of withheld taxes, ensuring a structured mechanism that binds both platforms and sellers within the national taxation system. Importantly, the regulation clarifies that it does not impose a new tax liability but instead reallocates the collection function to entities with greater technological and financial capacity.
Not every platform is subject to appointment. Under PMK 37/2025, only platforms meeting specific thresholds may be designated as withholding agents. These criteria, determined by the Director General of Taxes (DGT) under delegated authority, include:
This selective appointment ensures that only platforms with a material economic footprint and the infrastructure to perform tax collection are burdened with these duties.
The regulation prescribes a 0.5% (half percent) withholding rate applied to the gross turnover (peredaran bruto) of the seller from each transaction conducted on the platform, excluding VAT and Luxury Goods Sales Tax. This rate is modest but significant—it ensures regular revenue capture while minimizing excessive burden. The withholding applies at the time the platform receives payment from buyers, creating a timely and enforceable collection point.
To protect small sellers, PMK 37/2025 provides an exemption for individual sellers whose annual turnover does not exceed IDR 500 million. Such sellers must submit a written statement confirming their turnover status to the platform. Additionally, sellers holding an official SKB (Surat Keterangan Bebas) are exempt from withholding. For those under final income tax regimes (e.g., PP 23/2018), the withheld amount may be treated as final, while for others, it remains creditable against annual income tax liabilities.
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Once appointed, platforms are legally bound to:
This transforms e-commerce platforms into quasi-fiscal intermediaries, ensuring that tax collection occurs at the point of transaction rather than relying on sellers’ self-assessment.
Marketplaces must issue tax receipts or withholding certificates to sellers, serving as proof of deduction. Such documents are critical for sellers to reconcile their records, claim tax credits, or assert compliance in the event of audits. The regulation prescribes minimum data requirements—including seller identity, transaction amount, and withholding figures—to ensure transparency and auditability.
Appointed platforms must provide the DGT with periodic data reports, covering transaction details, seller profiles, and amounts withheld. While this strengthens enforcement, it also raises important considerations under Indonesia’s Personal Data Protection Law (Law No. 27/2022), requiring platforms to balance data privacy obligations with regulatory compliance.
For MSMEs above the IDR 500 million threshold, withholding at source ensures compliance but reduces liquidity. Sellers must enhance bookkeeping to reconcile withheld taxes with overall tax obligations. For smaller sellers, the exemption mechanism reduces administrative burdens, but compliance with statement requirements remains essential to avoid unnecessary deductions.
Large global platforms such as Shopee, Tokopedia, Lazada, and Amazon face direct compliance obligations under Indonesian law, even without physical presence. This creates a new tax nexus, consistent with international trends, ensuring fairness between local and foreign operators.
Although the regulation targets sellers and platforms, consumers indirectly benefit from improved regulatory certainty and fairness. By capturing tax revenues from the digital sector, the State strengthens its capacity to fund infrastructure and public services, ultimately supporting broader socio-economic stability.
The DGT is empowered to issue appointment decrees, monitor compliance, and impose administrative sanctions, including fines or public naming of non-compliant platforms. However, effective implementation requires advanced monitoring systems, cross-agency cooperation, and potentially international coordination for foreign platforms.
Platforms must navigate potential conflicts between tax reporting obligations and data protection regulations, especially when handling cross-border transactions. Foreign platforms may invoke double taxation treaties to contest certain aspects of withholding, necessitating careful legal interpretation to avoid treaty violations.
Potential disputes include:
Such disputes may escalate to the Tax Court or even judicial review proceedings, making it crucial for platforms and sellers to maintain meticulous compliance records.
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PMK 37/2025 embodies the OECD/G20 Base Erosion and Profit Shifting (BEPS) Pillar One principle, where taxation rights are allocated based on digital economic presence rather than physical presence. By requiring platforms to act as tax collectors, Indonesia aligns itself with global best practices in combating profit shifting and tax evasion.
Indonesia’s model is distinctive in targeting domestic sellers with a modest, creditable withholding rate, thereby balancing administrative efficiency with fairness.
At Kusuma & Partners, we emphasize that PMK 37/2025 is not merely a fiscal tool but a structural reform reshaping the digital economy. We advise:
In our experience, early compliance not only mitigates legal risk but also enhances credibility with regulators, investors, and consumers.
The issuance of PMK 37/2025 represents a decisive advancement in Indonesia’s taxation of the digital economy. By appointing e-commerce platforms as income tax collectors, the regulation ensures broader compliance, levels the playing field between digital and traditional commerce, and reinforces Indonesia’s alignment with international tax reforms. For businesses, this regulation is not merely a technical adjustment—it is a paradigm shift that demands strategic planning, compliance readiness, and proactive legal risk management.
PMK 37/2025 impacts businesses and investments, making professional legal guidance critical. Kusuma & Partners Law Firm offers comprehensive advisory on compliance strategies, contractual adjustments, dispute resolution, and cross-border tax implications. Contact us today to secure your position in Indonesia’s evolving digital economy.
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“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”
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