Financial Technology is one of the technological developments that began to bloom in Indonesia around 2015. Where the emergence of Financial Technology was marked by the establishment of the Indonesian Fintech Association (AFI). Financial Technology combines two aspects of technology and finance into one innovation that can make it easier for humans to carry out economic activities. One type of business in the Financial Technology industry is Peer-to-Peer Lending Services, which are regulated in Financial Services Authority Regulation (POJK) Number 77/POJK.01/2016 regarding Information Technology-Based Borrowing-Lending Services. Peer-to-Peer Lending Services are used as an alternative to acquiring capital for business people with an easy online process. However, along with its development, there are certain parties that misuse this Financial Technology, especially in Peer-to-Peer Lending Services, causing losses to many parties. Therefore, the Minister of Finance issued Regulation Number 69 of 2022, which is used as a control and legal certainty in fulfilling transaction obligations and tax obligations.
I. Definition of Peer-to-Peer Lending Service
Peer-to-Peer Lending Service is the provision of services to connect Lenders with Borrowers in order to facilitate direct lending agreements through an electronic system using the internet network, including those that adhere to Sharia principles.
There are three main actors in Peer-to-Peer Lending Services, including:
- Lender: the party providing credit or loans to another party, which can be an individual, a financial institution, or a private entity.
- Borrower: the party receiving credit or loans who meets the criteria for obtaining a loan from the Lender.
- Peer-to-Peer Lending Service Provider: the party that acts as an intermediary between Lenders and Borrowers, which can be in the form of an institution or a specific legal entity that already has a license and/or is registered with the Indonesia Financial Services Authority (OJK).
II. Income Flow in the Provision of Peer-to-Peer Lending Services
In peer-to-peer lending services facilitated by Financial Technology, both the Lender and the Peer-to-Peer Lending Service Provider can generate income from these activities. The income flow is as follows:
1. Lender
The Lender will receive income in the form of loan interest, which is paid by the Service Provider. The loan interest paid by the Service Provider is not considered a cost and cannot be deducted from gross income to determine the service provider’s taxable income.
2. Peer-to-Peer Lending Service Provider
The Service Provider obtains income in the form of fees, commissions, ujrah (an Islamic finance term), or other rewards from the Lender and/or Borrower. The Service Provider, as an intermediary between the Lender and the Borrower, gets an additional commission in the form of the difference in the excess value of the loan interest if the loan value paid by the Borrower to the Service Provider is greater than the interest rate paid by the Service Provider to the Lender.
The following is a scheme for the Income Flow in the Provision of Peer-to-Peer Lending Services :
III. Tax Aspects in the Provision of Peer-to-Peer Lending Services
1. Income Tax
- Tax Obligations for Lenders
- Interest income received or earned by the Lender is subject to Withholding Income Tax Article 23 if the Borrower is a Domestic Taxpayer and a Permanent Establishment, and is subject to Withholding Income Tax Article 26 if the Borrower is a Foreign Taxpayer and other than a Permanent Establishment;
- Withholding Income Tax Article 23 is subject to a tax rate of 15% of the gross amount of interest, and Withholding Income Tax Article 26 is subject to a tax rate of 20% of the gross amount, or it can be under the provisions of the Double Taxation Avoidance Agreement (DTAA).
- Interest income received by the Lender must be reported in the Lender’s Annual Income Tax Return.
- Tax Obligations for Service Providers
Technically, the Service provider is appointed as the tax withholder for the Lender. The Service Provider, as the tax holder, has the following obligations:
- Make a withholding tax slip and give it to the Lender. For each withholding tax slip issued, the Service Provider can make one Withholding Tax Slip for all transactions received by one Lender in one term;
- Deposit Withholding Income Tax Article 23 and Withholding Income Tax Article 26 that have been withheld to the state treasury;
- Report Withholding Income Tax Article 23 and Withholding Income Tax Article 26 in the periodic income tax return.
2. Value-Added Tax
- Tax Obligations for Lenders
Peer-to-Peer Lending Services are submitted by Service Providers to Lenders and/or Borrowers. For these services, the Lender provides placement of funds, lending, or financing services to the Borrower through the facilities provided by the Service Provider. Based on Article 15 paragraph (1) of the Minister of Finance Regulation Number 69/PMK.03/2022, this service is a type of service that is exempt from the imposition of VAT. So that the services performed by the Lender are not subject to VAT. - Tax Obligations for Service Providers
- Providers that have been confirmed as Taxable Enterprises must collect, deposit, and report VAT;
- VAT is calculated by multiplying the rate as stipulated in Article 7 paragraph (1) of the VAT Law by the Tax Basis.
- Tax Basis on Peer-to-Peer Lending Service can be reimbursement of fees, commissions, or other rewards, including the difference in the loan interest rate.
Based on the explanation above, it can be concluded that many types of transactions are applied through Financial Technology. One of them is Peer to Peer Lending, where, for this service, three parties are interrelated with each other. For Peer-to-Peer Lending Services, two aspects of taxation appear, namely Income Tax and Value-Added Tax, so that based on the existing taxation aspects, each party in a transaction must deduct or collect, deposit, and report them in a tax return, either in a periodic or an annual tax return.
