[Indonesia] New criteria for foreign digital service providers to collect VAT

In June 2020, Indonesia’s Director-General of Tax issued Regulation No. PER-12/PJ/2020 (Reg 12/2020), which sets out the criteria for foreign digital service providers to collect value-added tax (VAT) in the country. ASEAN Briefing breaks down all the key details.

According to Reg 12/2020, a digital service provider is appointed as a ‘VAT collector’ by the Ministry of Finance if they achieve a certain amount of annual transactions or reach a certain number of website traffic per year. 

In May 2020, the government issued Reg 48/2020, which imposes a 10 per cent VAT rate on non-resident digital services, starting July 1, 2020. Under the regulation, the tax applies to businesses that have ‘significant economic presence’ in Indonesia, covering software providers, multimedia, and big data firms, among others. 

Indonesia joins Malaysia and Singapore as the latest ASEAN country to try to secure tax revenues from multinational tech corporations. In Malaysia, foreign digital service providers pay a six per cent VAT rate whereas in Singapore the rate is set at seven per cent. 

Appointment of VAT collectors 

Digital products and service providers are obligated to charge VAT if: 

• They are foreign merchants who sell digital products to Indonesian customers; 
• They are international online marketplaces who sell digital products to Indonesian consumers; or 
• Are Indonesian operators of online marketplaces that sell foreign digital products to local consumers. 

Reg 12/2020 states that for the aforementioned businesses to be classified as VAT collectors, they must fall under on these following categories: 

• Must have total transactions in Indonesia worth more than 600 million rupiah (US$41,500) per year or 50 million rupiah (US$3,400) per month; or 
• Have total web traffic in Indonesia that exceeds 12,000 visitors per year or 1,000 per month. 

Once a company is deemed a VAT collector, they are expected to start collecting taxes as of August 2020. 

Reporting obligations 

VAT collectors are subject to quarterly reporting periods, which are: 

• January to March; 
• April to June; 
• July to September; and, 
• October to December 

The tax returns should contain information regarding the total number of recipients, the amount of tax collected, and the amount of tax paid. 

The government has allowed businesses to pay their VAT deposits in several currencies namely: 

• Rupiah; 
• US dollar; and 
• Other foreign currencies to be determined by the Director-General of Tax. 

This article was first published by ASEAN Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in  China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to info@dezshira.com for more support. 

In June 2020, Indonesia’s Director-General of Tax issued Regulation No. PER-12/PJ/2020 (Reg 12/2020), which sets out the criteria for foreign digital service providers to collect value-added tax (VAT) in the country. ASEAN Briefing breaks down all the key details.

According to Reg 12/2020, a digital service provider is appointed as a ‘VAT collector’ by the Ministry of Finance if they achieve a certain amount of annual transactions or reach a certain number of website traffic per year. 

In May 2020, the government issued Reg 48/2020, which imposes a 10 per cent VAT rate on non-resident digital services, starting July 1, 2020. Under the regulation, the tax applies to businesses that have ‘significant economic presence’ in Indonesia, covering software providers, multimedia, and big data firms, among others. 

Indonesia joins Malaysia and Singapore as the latest ASEAN country to try to secure tax revenues from multinational tech corporations. In Malaysia, foreign digital service providers pay a six per cent VAT rate whereas in Singapore the rate is set at seven per cent. 

Appointment of VAT collectors 

Digital products and service providers are obligated to charge VAT if: 

• They are foreign merchants who sell digital products to Indonesian customers; 
• They are international online marketplaces who sell digital products to Indonesian consumers; or 
• Are Indonesian operators of online marketplaces that sell foreign digital products to local consumers. 

Reg 12/2020 states that for the aforementioned businesses to be classified as VAT collectors, they must fall under on these following categories: 

• Must have total transactions in Indonesia worth more than 600 million rupiah (US$41,500) per year or 50 million rupiah (US$3,400) per month; or 
• Have total web traffic in Indonesia that exceeds 12,000 visitors per year or 1,000 per month. 

Once a company is deemed a VAT collector, they are expected to start collecting taxes as of August 2020. 

Reporting obligations 

VAT collectors are subject to quarterly reporting periods, which are: 

• January to March; 
• April to June; 
• July to September; and, 
• October to December 

The tax returns should contain information regarding the total number of recipients, the amount of tax collected, and the amount of tax paid. 

The government has allowed businesses to pay their VAT deposits in several currencies namely: 

• Rupiah; 
• US dollar; and 
• Other foreign currencies to be determined by the Director-General of Tax. 

This article was first published by ASEAN Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in  China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to info@dezshira.com for more support.