The Indonesian Minister of Finance recently announced the official revocation of the policy requiring e-commerce platforms to withhold Article 22 income tax (PPh Pasal 22) from online merchants. The policy was originally scheduled to take effect on August 1, 2026. The core reason for this suspension is that the Indonesian economy has not yet shown signs of rapid recovery. In a statement at his office in Jakarta, he said that the implementation of this tax regulation would be postponed for now. According to economic data, Indonesia's economic growth rate in the second quarter of 2026 was 5.29%, compared with the high growth rate of 5.61% in the first quarter of 2026. The second-quarter data did not reflect strong resilience in economic recovery. The Minister of Finance pointed out that the 5.29% growth rate is still far from sufficient, and the economy needs stronger growth momentum.
Regarding the 0.5% final income tax for online merchants, the Indonesian government stated that it will only re-implement the policy after various supporting economic indicators have genuinely improved. The reference indicators to be observed include the consumer confidence index, real sales index, and other key data. Only when all indicators send clear positive signals and the economy achieves high-speed growth can this tax policy be resumed several months later. It is understood that the Directorate General of Taxes under the Ministry of Finance had previously designated four e-commerce platforms to undertake tax withholding duties, namely Tokopedia, Shopee, Lazada, and Blibli. These platforms are required to directly withhold income tax from sellers' transactions.
This tax regulation is stipulated in Minister of Finance Regulation No. 37 of 2025. Affected by the economic environment, he had previously postponed the implementation of this regulation multiple times, and this time he directly announced its cancellation. The original mechanism of this policy was not to introduce a new tax type, but rather to change the way online sellers self-declare and pay income tax to a unified withholding by e-commerce platforms. However, given the current weak economic recovery and the operational pressure on small and medium-sized online merchants, the Indonesian Ministry of Finance chose to press the pause button to avoid adding operational burdens to e-commerce practitioners. The timing for resuming the policy will be re-evaluated based on macroeconomic trends.
