Indonesia introduced a value-added tax (VAT) for intangible digital goods and services to overseas providers that took effect recently on July 1, 2020. Trades through Electronic Systems (PMSE or Perdagangan melalui Sistem Elektronik) are subject to a VAT of 10%. Indonesia is not the only country in the region to pass such taxes. Singapore and Malaysia have previously imposed a 7% and 6% VAT respectively on overseas digital goods and services. This article discusses what you need to know regarding the Indonesian VAT regulations on digital goods and services for overseas providers.
The Definition of Digital Goods and Services
The Indonesian Tax Office classifies a ‘digital good’ as an intangible good in the form of electronic or digital information, covering all goods that have been converted or transformed or those that are electronic in their origin. This includes but not limited to e-Books, e-magazines, e-comics; software, digital apps and games. Whereas a ‘digital service’ is defined as any service delivered through the internet or electronic network, whose nature is automatic or with little human interference, and impossible to be confirmed without information technology, including but not limited to software-based services.
Digital Products and Services Providers Subject to the VAT
Overseas digital goods and services providers that conduct transactions with customers residing in Indonesia through electronic systems are subject to the Value-Added Tax if the value of their transactions exceeds IDR 600 million per year or IDR 50 million per month, and the traffic coming from Indonesia exceeds 12,000 visitors per year or 1,000 per month.
As of October 2020, there are 28 overseas Value-Added Tax providers, including major giant tech companies such as Google, Facebook, Microsoft, Amazon, etc. The full list is as follows:
| VAT collectors on digital goods and services | |
|---|---|
| Per July 7 | Per September 8 |
| Amazon Web Services Inc Google Asia Pacific Pte. Ltd Google Ireland Ltd Google LLC Netflix International B.V. Spotify AB |
LinkedIn Singapore Pte. Ltd McAfee Ireland Ltd Microsoft Ireland Operations Ltd Mojang AB Novi Digital Entertainment Pte. Ltd PCCW Vuclip (Singapore) Pte. Ltd Skype Communications SARL Twitter Asia Pacific Pte. Ltd Twitter International Company Zoom Video Communications, Inc PT Jingdong Indonesia Pertama PT Shopee International Indonesia |
| Per August 7 | Per October 8 |
| Facebook Ireland Ltd Facebook Payments International Ltd Facebook Technologies International Ltd Amazon.com Services LLC Audible, Inc Alexa Internet Audible Ltd Apple Distribution International Ltd Tiktok Pte. Ltd The Walt Disney Company Pte. Ltd |
Alibaba Cloud (Singapore) Pte Ltd GitHub, Inc. Microsoft Corporation Microsoft Regional Sales Pte. Ltd UCWeb Singapore Pte. Ltd To The New Pte. Ltd Coda Payments Pte. Ltd Nexmo Inc |
Update per January 2021:
eBay & NordVPN
Value-Added Tax: Potential Sanctions
VAT providers are directly appointed by the Indonesian Tax Office. The sanctions for not reporting and submitting the Value-Added Tax are not explicitly mentioned in the newly stipulated Minister of Finance Regulation No 48/2020 and therefore it is not very clear what would happen if a company failed to comply. In addition, the sanctions mentioned in the Value-Added Tax Law 1984 are also not applicable due to the difference in the procedures of collecting the taxes for resident and overseas taxpayers.
However, Law No 2/2020 states that overseas digital goods and services providers who fail to comply with the regulations will face administrative sanctions in the form of termination of access after being given a warning. The Ministry of Finance has the right to notify the Ministry of Communication and IT to request termination of access.
Conclusion
We have years of experience in providing taxation services and if you require any further information about value-added tax that not mentioned in this article, do not hesitate to reach out to us at anita@permitindo.com or fill out this form. We look forward to hearing from you.
References
Minister of Finance Regulation (Permenkeu) No 48/2020
Indonesian Law No 2/2020
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