<![CDATA[Indonesia's rapid digital economy growth has positioned the country as a major market for cross-border Over The Top (OTT) and e-commerce providers such as Netflix, Spotify, Google, and Meta. However, the conventional Permanent Establishment (PE) concept, which requires physical presence, is no longer adequate to capture taxing rights over income earned by these digital enterprises from the Indonesian market. The Government responded through Government Regulation in Lieu of Law Number 1 of 2020, later enacted as Law Number 2 of 2020, introducing the concept of significant economic presence as the basis for imposing Income Tax (PPh) or Electronic Transaction Tax (PTE), alongside Value Added Tax (VAT) on electronic commerce that has been effectively implemented through Minister of Finance Regulation Number 48/PMK.03/2020 and its amendments. This study analyzes the legal framework and juridical problems in implementing the significant economic presence concept, relating it to the principles of tax sovereignty, Double Taxation Avoidance Agreements (DTA), and legal certainty. The study employs a normative juridical method with statute and conceptual approaches, descriptive-analytical in nature, using library research. The findings indicate that although the legal framework for significant economic presence exists, its implementation as a basis for PPh/PTE remains ineffective because quantitative thresholds have not been further regulated and potentially conflict with DTA commitments. Meanwhile, current practice is limited to VAT collection, so the fiscal contribution of global digital companies is considered disproportionate to the economic value they extract from the Indonesian market. This study recommends the issuance of derivative regulations that definitively set the significant economic presence thresholds, strengthening Indonesia's position within the OECD Pillar One and Pillar Two global consensus framework, and harmonizing such measures with the latest bilateral trade agreements, including reciprocal trade schemes, to minimize the risk of tariff retaliation.]]>
