The Indonesian Government just issued PMK No. 69/PMK.03/2022 on Income Tax and Vallued Added Tax (VAT) on the Financial Technology Operator (Pajak Penghasilan dan Pajak Pertambahan Nilai atas Penyelenggaraan Teknologi Finansial) (“PMK 69”). The Indonesian Government through PMLK69 targets the imposition of taxation on the financial technology providers, including income tax for the earning of transaction of the Peer-to-Peer lending (P2P) through the interest of the loan and the VAT for every service being provided by payment services provider. The PMK 69 will be effective on 1 May 2022.
Income Tax on the Interest Earnings in the P2P Transaction
The interest over the loan in the P2P transaction is considered as earnings of the lender. This earning is subject to income tax (article 2 PMK 69). Such earning then must be reported in the annual tax return of the lender.
Pursuant to article 3 of PMK 69, the income tax tariff of interest on the loan is subject to the status of the lender:
| Income Tax Law Application | Tariff | |
| Domestic taxpayers or the permanent establishments | Article 23 of the Income Tax Law | The income tax tariff would be 15% of the gross interest amount |
| Foreign taxpayers | Article 26 of the Income Tax Law | The income tax tariff would be 20% of the gross interest amount or in accordance with the agreed amount in the Tax Treaty applicable. |
The income tax must be then withheld by the P2P operator that has legally obtained a P2P license from the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) and/or registered at OJK. In the case where the interest is not paid through the P2P operator, the tax income must be withheld by the borrower.
VAT on the Services in the Financial Technology Operator
Under PMK 69, the following services of the Financial Technology Operator are subject to VAT:
- Payment services, including e-money, e-wallet, switching, clearing and payment gateway activities, final settlement and fund transfer,
- Investment settlement,
- Equity crowdfunding,
- P2P services,
- Investment management,
- Online insurance (insurtech),
- Market support services, and
- Digital financial support services and other financial service activities, including eco crowdfunding, Islamic digital financing, ewaqf and e-zakat, robo advise and credit scoring, invoice trading, voucher/token, and other blockchain-based products.
PMK 69 requires the following entity to collect, submit and report the VAT (the VAT tariff would be the tariff under the prevailing laws and regulations. The applicable VAT tariff is currently 11%):
- Company that conducts the payment services provider and has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, merchant discount rate or other consideration (as applicable) obtained from the services provided to the consumer.
However, the PMK clearly stipulates that the VAT would not be imposed on the nominal value of the transaction, e.g., the bonus point, top-up point, reward point and loyalty point. In the case of the e-money, the VAT object would be the administration fee imposed by the issuer to the consumers, e.g., the administration fee for the top-up of the e-money.
In the case of fund transfer, the PMK 69 exempts VAT on fund transfer services within the same bank to the customers holding current accounts, time deposits, certificates deposits, savings, and/or other equivalent forms.
- Investment settlement operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
- Equity crowdfunding operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
- P2P operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
- Investment Manager that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity. The PMK 69 exempts VAT on the fund placement service by the investor to the securities issuer or other financial instrument through the electronic communication infrastructure provided by the Investment Manager.
- Online insurance operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
- Market support services operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
- Other digital financial support services operator that has been appointed as a taxable entrepreneur. The VAT is over the fee, commission, or other fees in the name and other form that is received by such entity.
Other Exception:
- Article 15 paragraph 1 of PMK 69: Fund placement services or financing by the investors (not the equity crowdfunding fee services by the equity crowdfunding operators) in an equity crowdfunding platform,
- Article 15 paragraph 3 of PMK 69: Fund placement services, lending, or financing by lenders (not the P2P services charged by the P2P operators) in a P2P platform,
- Article 17 paragraph 5 of PMK 69: The online insurance services that are provided by the insurance companies.
For further information, please contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
