Directorate General of Taxes Regulation Number PER-7/PJ/2025, which came into effect on May 21, 2025, has significantly transformed the landscape of virtual office usage in Indonesia, particularly for business owners seeking to register as Taxable Entrepreneurs (Pengusaha Kena Pajak/PKP). This regulation is a direct response to the rampant misuse of virtual offices that were only utilized as fictitious addresses for tax administration purposes, without any genuine business activities taking place at those locations.
Definition of Virtual Office in the Tax Context
This regulation defines a virtual office as an office that has physical space and is equipped with supporting office services provided by virtual office service entrepreneurs, to be used as a place of domicile, place of business activities, or correspondence jointly by two or more entrepreneurs. The crucial point in this definition is the existence of physical space and supporting services that are actually provided by the service provider, distinguishing it from mere building rental services or serviced offices.
In other words, a tax-compliant virtual office is not merely a mailing address. Service providers must have adequate physical infrastructure and provide operational support for their users. This definition serves as the foundation for all subsequent provisions in PER-7/PJ/2025.
Mandatory Requirements for Businesses Using Virtual Office for PKP
Article 51 paragraph (1) of PER-7/PJ/2025 stipulates that corporate taxpayers may use a virtual office as their PKP registration place in two scenarios: first, if the business has its domicile for example a virtual office Jakarta and has only one business activity location at that virtual office; or second, if the business has its domicile in a Free Trade Zone and Free Port (KPBPB).
For the first scenario, there are three cumulative requirements that must be fulfilled under Article 51 paragraph (5) of PER-7/PJ/2025:
1. Business Classification (KLU) in the Services Sector
The business must have a main business classification in the services sector whose activities can be conducted at a virtual office. This provision firmly closes the door for companies in the trading, manufacturing, construction, logistics, and large-scale e-commerce sectors that require physical presence from using a virtual office as their PKP registration place.
This change is highly significant compared to the previous regulations under PMK 147/2017, which did not restrict virtual office usage only to specific service KLUs. With this restriction, companies in non-service sectors must have an actual physical office to be registered as PKP.
2. Minimum 1-Year Contract
Businesses must have a contract, agreement, or similar document with the virtual office service provider with a validity period of at least 1 year, calculated from the date the PKP registration application is submitted. This provision aims to ensure that businesses have long-term commitment and sustainable business presence, not merely temporary registration for administrative purposes.
3. Prohibition on Using Solely as a Mailing Address
Businesses may not use the virtual office solely as a correspondence or mailing address. Kring Pajak (the tax authority’s information center) clarifies that a virtual office must truly be used to support business activities, such as for client meetings, operational communication, or other light business activities.
These three requirements apply to PKP who have their domicile at a virtual office and have only one business activity location. If a corporate taxpayer is domiciled at a virtual office but has more than one business activity location, the PKP registration place is designated at another business activity location other than that virtual office.
Obligations for Virtual Office Service Providers
For a virtual office to be used as a PKP registration place, the virtual office service provider must also meet several strict requirements under Article 51 of PER-7/PJ/2025:
- Has been registered as PKP — the service provider must have PKP status to accept users who will also be registered as PKP.
- Provides physical space for conducting business activities for businesses that will be registered as PKP.
- Actually provides supporting office services — these services must genuinely be operated, not merely claimed in documents.
- Has a valid service provision contract with the user that is still in effect.
- Has a Business Identification Number (NIB) or similar licensing document.
These provisions force virtual office service providers to operate professionally and have genuine business substance. The practice of providing fictitious addresses without adequate operational support can no longer survive under this new regulation.
Special Provisions for Businesses in KPBPB
For corporate taxpayers domiciled in the Free Trade Zone and Free Port (KPBPB), there are special provisions under Article 51 paragraph (1) letter b of PER-7/PJ/2025. They may use a virtual office as their PKP registration place with three requirements:
- They do not have another business activity location outside the KPBPB other than at that virtual office.
- They have a contract with the virtual office service provider of at least 1 year.
- The domicile and/or business activity location within the KPBPB has been verified and proven to genuinely have business activities.
This provision provides certainty for businesses in free trade zones who wish to expand their operations outside the zone, while still adhering to the same compliance standards.
Transition Period and Consequences of Violations
The government has provided a transition period until December 31, 2025, for businesses to adjust their virtual office contracts to the new provisions. After the transition period ends, businesses that do not meet the above requirements may face serious consequences, including:
- Rejection of PKP registration applications
- Revocation of PKP status for those already registered
- Cancellation of tax refunds (restitusi)
- In-depth tax audits that could potentially result in administrative sanctions
Implications for the Business World
This regulation marks a paradigm shift in tax compliance supervision in Indonesia. The Directorate General of Taxes no longer merely accepts domicile addresses as stated in documents, but demands proof of actual business presence. For business owners, this policy requires more careful planning in choosing operational structures and business locations.
Service sector companies that indeed do not require physical presence can still utilize virtual offices, as long as they meet all the strict requirements stipulated in PER-7/PJ/2025. Meanwhile, companies in the trading, manufacturing, and logistics sectors must immediately prepare physical offices if they wish to remain registered as PKP and legally conduct their business operations in Indonesia.