Minister of Finance Regulation Number 37 of 2025 Takes Effect! Marketplaces Now Required to Withhold 0.5% Income Tax on Online Merchants’ Revenue

Introduction

On 11 June 2025, the Ministry of Finance of the Republic of Indonesia issued Minister of Finance Regulation Number 37 of 2025 on the Appointment of Other Parties as Income Tax Withholding Agents and the Procedures for the Withholding, Payment, and Reporting of Income Tax Withheld by Other Parties on Income Received or Earned by Domestic Merchants Through Electronic Commerce (“MOF Regulation 37/2025”), which took effect on 14 July 2025.

MOF Regulation 37/2025 designates digital platform operators as withholding agents responsible for collecting income tax on sales proceeds earned by online merchants.

In addition, MOF Regulation 37/2025 promotes public participation in national development through tax compliance based on the principles of legal certainty, fairness, and administrative simplicity. The Government considers it necessary to improve the efficiency of tax collection by directly appointing digital platform operators (marketplaces) as an extension of the Government in collecting income tax on the earnings of domestic merchants.

Key Provisions

Appointment of Electronic Commerce Operators (“PPMSE”) as Tax Withholding Agents

Pursuant to Articles 2 and 3, the Minister of Finance is authorized to appoint Other Parties, namely Electronic Commerce Operators (Penyelenggara Perdagangan Melalui Sistem Elektronik – “PPMSE”), such as marketplaces, as withholding agents for Article 22 Income Tax (“PPh Article 22”) on income earned by Domestic Merchants.

Appointed platform operators must satisfy certain criteria, namely operating an escrow account and having a transaction value or website traffic exceeding the thresholds determined during the preceding twelve (12) months.

Marketplace operators that have been officially appointed by the Government as tax withholding agents are authorized to withhold Article 22 Income Tax on income earned by online merchants conducting sales through their platforms.

0.5% Income Tax Rate and Withholding Mechanism

Pursuant to Article 7 paragraph (1), income received or earned by Domestic Merchants from transactions conducted through a PPMSE is subject to Article 22 Income Tax.

Furthermore, Article 8 paragraph (1) provides that the amount of Article 22 Income Tax to be withheld is 0.5% of the gross turnover (gross revenue) stated in the billing document, excluding Value Added Tax (“VAT”) and Luxury Goods Sales Tax (“LGST”).

The tax becomes payable and is automatically withheld by the platform operator when payment is received through the marketplace. The 0.5% withholding may subsequently be credited as part of the merchant’s Final Income Tax settlement.

Exemption from Tax Withholding

Article 10 exempts the withholding of Article 22 Income Tax on sales transactions conducted by Individual Taxpayers whose gross turnover does not exceed IDR500,000,000 (five hundred million rupiah) during the relevant Tax Year, provided that the taxpayer has submitted an official declaration letter.

The exemption also applies to:

·      courier and delivery service transactions conducted by domestic individual taxpayers acting as partners of technology-based transportation platform companies;

·      merchants holding an Income Tax Exemption Certificate (Surat Keterangan Bebas – “SKB”); and

·      sales transactions involving prepaid mobile phone credit, gold jewelry or bullion, and land and/or buildings.

Administrative Obligations of Online Merchants

Pursuant to Article 6, every marketplace merchant is required to provide the marketplace operator with:

·      their Taxpayer Identification Number (“NPWP”) or National Identity Number (“NIK”); and

·      their correspondence address,

before receiving any income through the platform.

Individual Taxpayers with annual gross turnover not exceeding IDR500 million are also required to submit a declaration letter to the marketplace operator.

Where the merchant’s gross turnover subsequently exceeds the prescribed threshold, the merchant must submit a new declaration letter no later than the end of the month in which the threshold is exceeded, allowing Article 22 Income Tax withholding to commence in accordance with the applicable laws and regulations.

Transitional Provisions

Article 17 requires Domestic Merchants to submit their identity information, consisting of their NPWP or NIK, together with the declaration letter relating to gross turnover for the 2025 Tax Year, no later than one (1) month from the date on which the marketplace operator is officially appointed as an Article 22 Income Tax withholding agent.

With respect to sanctions, Article 16 provides that platform operators (marketplaces) failing to fulfill their obligations relating to the withholding, payment, and reporting of taxes will be subject to dual sanctions, namely:

·      sanctions under the prevailing tax laws and regulations; and

·      sanctions applicable to private electronic system operators under the relevant laws and regulations.

Closing

MOF Regulation 37/2025 fundamentally changes the mechanism for collecting income tax on income earned by Domestic Merchants conducting transactions through marketplaces.

By appointing marketplace operators as Article 22 Income Tax withholding agents, the Government seeks to improve the efficiency of tax administration, broaden tax compliance, and provide greater legal certainty in the collection of taxes within the electronic commerce ecosystem.

Marketplace operators should ensure that their systems are fully prepared to comply with the withholding, payment, and tax reporting obligations prescribed under MOF Regulation 37/2025.

At the same time, Domestic Merchants are required to fulfill their administrative obligations, including the submission of their NPWP or NIK and, where eligible for the withholding exemption, the required declaration letter. Compliance with these requirements is essential to ensuring that tax obligations are carried out in an orderly, accountable, and legally compliant manner.