The Directorate General of Tax has stated that online businesses will be subject to pay a monthly installment of their annual Income Taxes as set out in the Director General of Tax Regulation No. PER-32/PJ/2010 on the Implementation of the Imposition of Article 25 Income Tax for Certain Businesses Individual Tax Payer, which has been in force since it was signed by the Director General of Tax, M. Tjiptardjo, on 12 July 2010.
“Online businesses are categorized as [the Certain Business Individual Tax Payer] as set out in the [Director General of Tax Regulation],” stated the Sub-Head of Personal Income Tax Withholding at the Directorate General of Tax, Dasto Ledyanto, in Jakarta (23/7).
Individual online entrepreneurs are subject to the income tax installment obligation according to the legislation, since, despite not having a physical place of business, they are still subject to income tax liability.
In the Regulation, Certain Business Individual Tax Payer (‘WT OPPT’) is defined as an individual that conducts the sale or delivery of goods and services through a place of business. Consequentially, the WP OPPT must register themselves to obtain a Tax Payer Registration Number for each place of business in the Primary Tax Office of each jurisdiction hosting their place of business.
When asked about the fact that most online businesses do not have a physical place of business, Mr. Ledyanto said that this was not an obstacle since the location of the merchandise or of the individual engaging in the enterprise should be used. Therefore, a residence or a warehouse could be considered to be a place of business. “We consider a house or a storage location to be a place of business,” he explained.
He added that for the Directorate General of Taxation the focus is on the mechanism of the businesses’ operation. The Directorate does not limit the way each business conduct its marketing.
“The bottom-line of what we see is whether there are or are no transactions taking place. If there are transactions, and income from the transactions has not been taxed, the entrepreneur is obliged to pay the income tax installments,” he asserted.
However, Mr. Ledyanto acknowledged that surveillance must be improved. “Our taxation system is based on self-assessment. Taxpayers are the ones who are asked to honestly report their income,” he added.
The Directorate General of Taxation, according to Mr. Ledyanto, will improve its oversight and information technology capabilities. Including the supervision of the activities of individual businesses on the Internet.
Additionally, according to Mr. Ledyanto, the Directorate General of Tax is also in the process of reforming its bureaucracy, which will contribute to the capacity of the human resources.
Nonetheless, he is still hopeful that WP OPPTs will report their taxable income on their own accord. “The self-assessment system requires taxpayers to act honestly and possess a willingness to pay according to their obligations,” he concluded.
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