[World Tax News] Indonesia Imposes Withholding Tax on E-Commerce Platforms

Editorial Team – [2025] 176 taxmann.com 577 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. Indonesia introduces withholding tax obligations for e-commerce and online marketplace operators

Indonesia issued Ministry of Finance Regulation No. 37 of 11 June 2025 (PMK37/2025), which was published on 14 July 2025. The regulation introduces income tax withholding obligations for operators of e-commerce platforms and online marketplaces (platforms) that facilitate transactions. Under the regulation, both domestic and foreign platform operators are required to act as income tax withholding agents for transactions carried out by domestic traders offering goods or services in Indonesia through their platforms.

Domestic operators are generally subject to these obligations, while foreign operators are subject to the requirements based on specific thresholds relating to transaction value and/or platform traffic (users) over a 12-month period, as determined by the Minister. Platform operators will be formally notified if designated as withholding agents and are typically required to begin compliance in the month following such notification.

Domestic traders, comprising both individuals and legal entities, are subject to withholding, with certain exceptions, such as when their annual revenue does not exceed IDR 500 million. These traders are required to provide relevant information to the platform operator, who acts as the withholding agent. The withholding tax rate is 0.5% of the domestic trader’s gross turnover, excluding VAT and luxury goods sales tax, and must be withheld and remitted monthly. The amount withheld is treated as a prepayment of the domestic trader’s income tax. Regulation No. 37 generally takes effect on 14 July 2025.

2. Germany and Japan sign agreement on the arbitration procedure under the tax treaty

The German Ministry of Finance has released the agreement signed with Japan on 4 June 2025 concerning the implementation of arbitration procedures under paragraph 5 of Article 24 (Mutual Agreement Procedure) of the 2015 tax treaty between the two nations. Paragraph 5 stipulates that if a case remains unresolved within two years, any outstanding issues shall be submitted to arbitration at the request of the concerned person.

The agreement addresses, among other matters, the process for requesting arbitration, the selection and appointment of arbitrators, the conduct of arbitration, and the issuance and implementation of final decisions. It generally applies to arbitration requests submitted on or after 1 January 2017.

Source – Official Website

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