Indonesia's New E-Commerce Tax Targets SME Sellers

Indonesia is reintroducing e-commerce taxation through digital platforms after a failed attempt in 2018, reflecting a broader regional push to formalize digital economies. This latest regulation comes amid falling government revenues—down 11.4 percent year-on-year from January to May—despite continued growth in the country’s online commerce sector.

Southeast Asia’s largest digital market, Indonesia’s e-commerce sector is valued at $65 billion and is projected to exceed $150 billion by 2030, creating a massive untapped tax base. The government estimates it could generate up to IDR 20 trillion ($1.4 billion) annually from proper taxation of the sector.

Key Highlights

• Indonesia’s $65B e-commerce sector faces new platform tax rules.
• 0.5 percent seller tax targets SMEs; large platforms likely to benefit.
• Regional peers like Singapore and Malaysia already enforce digital VAT.

The new regulation targets small and medium-sized sellers, specifically those with an annual turnover between IDR 500 million and 4.8 billion, by imposing a 0.5% tax. Additionally, monthly VAT withholding (1–5 percent) and personal income tax deductions (0.5–2 percent) are expected to strain smaller sellers but benefit established platforms like Tokopedia and Shopee, which can manage the added compliance costs.

Also Read: Malaysia's E-commerce Market Poised for Growth in 2025

These changes align with similar moves by neighbors like Singapore (9 percent GST), Philippines (12 percent VAT), Malaysia (6 percent), and Thailand, all aiming to reclaim revenue lost to untaxed digital transactions. Indonesia also plans to eliminate low-value import exemptions and implement tax withholding mandates, further increasing pressure on smaller e-retailers.

The regulation is also a step toward leveling the playing field between online merchants and traditional retailers, who have long complained about unfair tax advantages for digital sellers.