Testing the Relevance of ITA 23 on Courier Services

The rapid growth of the e‑commerce industry over the past few years has fundamentally reshaped the logistics sector. Data from Statistics Indonesia show that the number of e‑commerce businesses in 2024 increased by 15.30% compared to the previous year. At the same time, the transportation and warehousing sectors recorded growth of 8.69%, exceeding national economic growth. 

These figures are more than mere statistics. They reflect the fact that parcel delivery services have become an important infrastructure of the modern economy. 

However, amid this transformation, the tax regulatory framework appears not to have fully kept pace. One key question continues to surface: are parcel delivery services subject to withholding under Article 23 of the Income Tax Law? 

A Regulatory Grey Area 

From a normative perspective, Minister of Finance Regulation No. 141/PMK.03/2015 includes transportation, expedition, and freight forwarding services as objects of Income Tax Article (ITA) 23. However, the regulation does not provide a clear definition of “transportation services.” 

This is where the issue arises. 

While parcel delivery services do involve the movement of goods, in practice, however, such services are far more complex. They integrate digital platforms, sorting processes, real‑time tracking systems, and last‑mile delivery to recipients. Reducing the entire process to merely “transportation services” risks overlooking the significantly evolved nature of the business. 

Classification and the VAT Perspective 

To better understand the nature of parcel delivery services, the Business Classification (KLU) under the Director General of Taxes Decision No. KEP‑233/PJ/2012 is often used as an interpretative reference. 

Under this classification, courier activities are distinguished from transportation/expedition or freight forwarding services, even though they are within the transportation and warehousing sectors. This separation indicates that, administratively, the tax authority recognizes courier services as a distinct activity. 

However, the KLU is primarily an administrative classification tool and does not directly determine tax treatment. A difference in classification does not automatically translate into different ITA 23 withholding obligations. 

Nevertheless, this distinction remains relevant as an indication that courier services have differing characteristics from logistics services, while also highlighting the need for clearer definitions within tax regulations. 

On the other hand, inconsistencies become even more apparent when viewed through the lens of Value Added Tax (VAT). For VAT, parcel delivery and freight forwarding services are subject to a specific tax base mechanism, resulting in an effective VAT rate of 1.1%. Meanwhile, transportation and logistics services continue to apply the standard tax base. This approach reflects the regulator’s recognition of the unique characteristics of parcel delivery services, which are marked by high transaction volumes, relatively small transaction values, and complex distribution chains. 

Unfortunately, a similar approach has yet to be reflected in ITA 23 withholding system. The absence of simplification or tailored withholding mechanisms for parcel delivery services has created inconsistencies between tax regimes, potentially leading to legal uncertainty for taxpayers when determining the correct withholding treatment. 

A Disproportionate Administrative Burden 

Beyond conceptual debates, the most significant challenges arise at the implementation level. In practice, the use of parcel delivery services, whether through providers such as JNE or J&T Express, typically involves mass transactions with relatively small value and is accessible to a wide range of users, including both individual and corporate taxpayers. 

As an illustration, a single entity may conduct hundreds of delivery transactions in a month, each with a relatively low value. In such circumstances, the obligation to withhold ITA 23 creates several difficulties; among others, high transaction volumes can result in administrative burdens that are disproportionate to the amount of tax withheld. Moreover, not all transactions are supported by formal billing documents such as invoices, particularly those conducted through applications or over‑the‑counter payments. 

Another complexity arises in prepaid or top‑up‑based business models—when the tax becomes payable is not always clear. Questions also remain regarding the issuance of withholding tax certificates—whether they must be issued per transaction or may be aggregated—an issue that continues to exist in a grey area of practice. 

From a commercial standpoint, not all service providers, especially agents or counter‑level operators, are administratively ready to manage ITA 23 withholding. In some cases, such condition pushes service users toward gross‑up arrangements, ultimately increasing the service users’ costs. 

These conditions highlight a mismatch between the design of the ITA 23 withholding mechanism and the realities of modern courier business models. 

Between Regulation and Business Reality 

Ultimately, the issue is not merely one of classification, whether courier services fall within the scope of ITA 23. The more fundamental concern lies in the gap between regulatory design and evolving business realities. 

If parcel delivery services continue to be treated as part of transportation services, the withholding mechanism should be adjusted to be simpler and more practicable. Conversely, if courier services are acknowledged as a distinct type of service with unique characteristics, it is time for more specific and adaptive regulations to be introduced. 

Without such adjustments, uncertainty will persist and may ultimately hinder the logistics ecosystem that has become a backbone of the digital economy. (KEN)

Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.