Muamalah Market is Questioned, is Paying Taxes in Foreign Currency Still Relevant?

Karsino Miarso, Wednesday, 24 February 2021

Muamalah Market is Questioned, is Paying Taxes in Foreign Currency Still Relevant?

Bank Indonesia (BI) in late January 2021 confirmed that rupiah is the sole legal payment method in Indonesia. This affirmation came after the news of reveal and arrest of Dirham market organizer recently. The viral and polemical news is interesting to discuss, especially in relation to the taxation provisions that allow tax payment to use a foreign exchange (forex).

The story begins with the arrest of Zaim Saidi, the initiator of Muamalah Market in Depok, West Java. The former journalist who is also a book writer was criminally threatened for conducting trade transactions using gold and silver coins equally treated as Dirham and Dinar.

As it went viral and became a hot topic of discussion among netizens, the police detained Zaim on charges of violating Article 9 of Law Number 1/1946 on Criminal Law and Article 33 of Law Number 7/2011 on Currency. In substance, both regulations prohibit payment transactions using a medium of exchange other than rupiah or rejecting rupiah as a legal means of payment. The threat of criminal penalty for any individual violating the Criminal Code is a maximum imprisonment of 15 years, while violations of the Currency Law are subject to a maximum fine of IDR200 million or maximum imprisonment of 1 year.

This raised the pros and cons. Some considered Zaim, as a pioneer of Dinar and Dirham trade transactions, has violated the provisions of rupiah as a single currency. Moreover, Zaim took a 2.5% margin of the difference between the gold and silver prices of PT Aneka Tambang when determining the value of the Dinar and Dirham coins.

Meanwhile, some other parties questioned the consistency of law enforcement over the use of bitcoin and foreign exchange transactions in border areas of Indonesia or tourist areas visited by many foreign tourists. Some also compared the trade practices at Muamalah Market with the providers of electronic game machines in malls requiring players to exchange money for special coins.

Surely, we still remember how BI banned the use of bitcoin or other virtual currencies as a means of payment in Indonesia. Even though it is banned, from time to time, more and more Indonesians are investing in bitcoin. Furthermore, in early 2019, BI also banned payments using Alipay and WeChat digital wallets in Indonesia. The prohibition was carried out following the discovery of a number of cases of Chinese tourists transacting using both applications in a number of Indonesian tourist destinations. BI's stance at that time was more focused on permits that the Chinese conglomerates, Jack Ma and Ma Huateng, did not have.

So far, none of the initiators of unlicensed bitcoin transactions and foreign digital wallets in Indonesia has been a legal prisoner or detained by security forces. In this case, I do not want to be tricked by political and racial issues, especially in the legal process that trapped Zaim Saidi.


If we observe Law Number 7 of 2011 on Currency, rupiah must be used in every transaction having payment purposes, settlement of other obligations that must be fulfilled with money, and other transactions conducted in the territory of Indonesia. Even on 1 July 2015, BI issued Bank Indonesia Regulation (PBI) Number 173/PBI/2015, which reaffirms the mandatory use of rupiah for cash and non-cash transactions, whether in the form of checks, bilyet giro, credit cards, debit cards, ATM cards, or other electronic payments.

In fact, the obligation does not apply in absolute terms as not all financial activities must use rupiah. BI allows the parties involved in the contract to make agreements using other currencies (not rupiah) for payment.

The exception to the use of rupiah is reserved for the following transactions:

  • Certain transactions in relation to the State Revenue and Expenditure Budget (APBN);
  • Gifts/grants made to or from overseas. Article 7 of PBI number 17 states that the exception only applies if the recipient or provider of the grant is domiciled abroad;
  • International trading transactions, which consists of the following activities: (a) export and/or import of goods to/from outside the customs territory of the Republic of Indonesia; and (b) the activities of trade in service (supply and consumption) exceeding the national borders (for example online purchases, call centers, or Indonesian patient care at overseas hospitals).
  • Bank savings in foreign currencies;
  • International financing transactions (if the provider or recipient of the funding is domiciled abroad);
  • Foreign currency activity performed by banks based on the Banking Law or the Sharia Banking Law;
  • Transactions of securities issued by the Government in foreign currencies in the primary and secondary markets under the Law regulating government securities and government sharia securities; and
  • Other transactions in foreign currencies conducted under the laws on BI, Capital Investment, and Indonesian Export Financing Institution.

In fact, even business entities having difficulty implementing the mandatory use of rupiah for non-cash transactions may request an exception from BI.

The use of foreign currency is also possible in the sales of Government Securities (SUN) on the domestic market. Finally, in the context of tackling the Covid-19 pandemic, the government regulates the procedures for payment and distribution of vaccine procurement funds in foreign currency.


In the field of taxation, the exemption of the use of rupiah for tax payment is possible for certain taxpayers who conduct bookkeeping and submit Tax Returns using foreign currency. This provision has been promulgated since 1999 through a Joint Decision between the Director General of Budget and the Director General of Taxes No.  KEP-306 /PJ/1999, KEP-60/A/1999 and most recently regulated by Minister of Finance Regulation (PMK) Number: 242/PMK.03/2014 on the Procedures for Tax Payment and Deposit.

In accordance with the PMK, the exemption from the use of rupiah for tax payment only applies to taxpayers who have obtained permission to conduct bookkeeping in the currency of the United States dollar. The taxpayers may make a self-payment for Income Tax Article (ITA) 25, ITA 29, and Final Income Tax as well as Tax Assessment Notice (SKP) and Tax Collection Letter (STP) issued in the United States dollar, using the United States dollar currency.

Meanwhile, the permission to conduct bookkeeping using the United States dollar currency is only given to certain taxpayers who meet the criteria in PMK Number 196/PMK.03/2007 as last amended by PMK Number 123/PMK.03/2019, which include;

  • Taxpayers in the framework of Foreign Capital Investment operating based on the provisions of laws and regulations in the field of the Foreign Capital Investment;
  • Taxpayers in the framework of a Contract of Work (KK) operating based on a contract/agreement with the Government of the Republic of Indonesia as set forth in the provisions in the mineral and coal mining sector;
  • Taxpayers who are Contractors of Cooperation Contracts (KKKS) operating under the provisions of laws and regulations in the oil and gas mining sector;
  •  Permanent Establishment as set forth in Article 2 paragraph (5) of the Income Tax Law or as stipulated in the related Double Taxation Avoidance Agreement (P3B);
  • Taxpayers who register their share issuance either partially or entirely on foreign stock exchanges;
  • Collective Investment Contract (KIK) issuing mutual funds denominated in the United States dollar and has obtained an Effective Registration Statement Letter from an independent institution conducting financial services regulation and supervision in accordance with the provisions of laws and regulations in the Financial Services Authority (OJK);
  • Taxpayers who are directly affiliated with the parent company abroad, namely a subsidiary company owned and/or controlled by an overseas parent company that has a special relationship as set forth in Article 18 paragraph (4) letter a and letter b of the Income Tax Law; or
  • Taxpayers who submit financial statements in their functional currency using the United States dollar in accordance with the applicable Financial Accounting Standards in Indonesia.

The policy on bookkeeping and Tax Return reporting using the United States dollar currency is of course highly appropriate and complies with the principles of applicable accounting standards, namely PSAK No. 10. The PSAK requires an entity to conduct bookkeeping using a functional currency. In other words, if an entity has a functional currency in the United States dollar, the bookkeeping must be done in the United States currency.

Then, the question is, what about the tax provisions that do not require payment using rupiah or allow foreign currency? In this context, it is possible to pay taxes using foreign currency in the territory of the Republic of Indonesia.

Even if taxpayers conduct bookkeeping in the United States Dollar, their tax payments are not necessarily in the same currency. What is the point of the exchange rate benchmark issued periodically by the Ministry of Finance if it cannot be used as a guideline for tax payment in rupiah?

There is no reason for the government to treat certain taxpayers differently just to be able to use foreign currency in the field of taxation and others in the territory of the Republic of Indonesia. If we want to preserve the dignity of rupiah as a symbol of the sovereignty of the State, it is time to review the provisions allowing the payment of taxes in foreign currencies.

**) The short version of the article was published on Kumparan.com on 18 February 2020.


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


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