Modernizing VAT Administration for Digital Commerce

Digital services are no longer limited to streaming platforms or online entertainment. Today, businesses increasingly rely on Software as a Service (SaaS), cloud computing, and artificial intelligence (AI)-powered solutions, digital marketplaces, and cross-border digital platforms to support their day-to-day operations. As the digital economy continues to evolve, tax administrations are also under growing pressure to ensure that existing regulatory frameworks remain capable of addressing increasingly complex digital business models and cross-border digital transactions.

Against this backdrop, the Directorate General of Taxes (DGT) issued Director General of Taxes Regulation No. PER-12/PJ/2025, effective 22 May 2025. The regulation replaces PER-12/PJ/2020, reflecting the implementation of the Core Tax Administration System (Coretax) and aligning the Value-Added Tax (“VAT”) administrative framework with Minister of Finance Regulation No. 81 of 2024 (PMK 81/2024). Rather than introducing a new VAT collection regime for electronic commerce (Perdagangan Melalui Sistem Elektronik/PMSE), the regulation primarily enhances the administrative framework to support a more integrated and modern tax administration system.

Smarter Framework for Digital VAT

The criteria for appointing Other Parties (Pihak Lain), previously referred to as “VAT collectors”, under the e-commerce regime remain largely unchanged. The DGT may appoint foreign merchants, foreign service providers, and e-commerce operators as Other Parties once they satisfy the prescribed economic thresholds, namely annual transaction values exceeding IDR 600 million (or IDR 50 million per month), and/or annual website traffic exceeding 12,000 users (or 1,000 users per month).

The regulation also clarifies that VAT obligations continue to apply even where a foreign merchant, foreign service provider, or e-commerce operator has not been appointed as an Other Party. In such cases, the responsibility for accounting for, remitting, and reporting VAT rests with the recipient of the goods or services under Indonesia's self-assessment system. This provision provides greater legal certainty by confirming that the absence of an appointed Other Party does not exempt digital transactions from VAT.

Under the previous regulation, appointed Other Parties were required to submit quarterly reports. Following the implementation of Coretax, VAT returns must now be filed on a monthly basis through the Taxpayer Portal (Portal Wajib Pajak). The regulation also requires more detailed reporting, including additional information on VAT-able transactions, to support a more integrated tax administration framework.

Formalizing Digital Marketplace

Beyond tax administration, the government has also introduced Minister of Trade Regulation No. 19 of 2026 on Trading Through Electronic Systems (Permendag 19/2026), which requires businesses operating through online marketplaces to obtain a Business Identification Number (Nomor Induk Berusaha/NIB). The regulation reflects the government's broader effort to strengthen business legitimacy and improve governance across Indonesia's digital commerce ecosystem.

Under the regulation, marketplace operators must reject registration applications from merchants that have not obtained an NIB. Existing merchants without an NIB must be designated as "Legalization in Progress", while the marketplace facilitates the licensing process through integration with the Online Single Submission (OSS) system.

The regulation introduces a more structured licensing mechanism. Newly registered merchants are generally required to complete the licensing process within six months from registration. Existing merchants already operating before the regulation came into force are granted a transition period of up to eighteen months to satisfy the new requirements. Should the required licensing remains outstanding beyond the specified timeframe, the marketplace operators are required to suspend the merchant’s trading activities through the platform. The regulation seeks to encourage the gradual formalization of digital businesses while avoiding unnecessary disruption to ongoing commercial activities.

Towards a More Trusted Digital Economy

Taken together, PER-12/PJ/2025 and Permendag 19/2026 reflect the government's broader effort to strengthen the governance of Indonesia's digital economy. Rather than introducing new VAT obligations, both regulations place greater emphasis on improving the administration and monitoring of compliance across digital commerce.

For taxpayers and digital businesses, PER-12/PJ/2025 represents an administrative modernization of VAT compliance through Coretax, while Permendag 19/2026 promotes greater business formalization through licensing and marketplace supervision. Together, they reflect Indonesia's gradual shift toward a digital regulatory ecosystem in which taxation, licensing, and business data become increasingly interconnected.

The long-term effectiveness of these reforms, however, will depend not only on stronger regulatory oversight, but equally on how quality of implementation. As digital business models continue to evolve, the challenge will be ensuring that greater transparency and administrative integration do not come at the expense of efficiency, accessibility, or innovation. Ultimately, modern regulation should enhance confidence in Indonesia's digital economy by making compliance more predictable, governance more reliable, and formal participation more attractive for business operating in an increasingly digital marketplace. (Shintya)