New Criteria for Foreign Digital Service Providers to Collect VAT in Indonesia

Written by: Ayman Falak Medina, ASEAN Briefing, Dezan Shira & Associates

Posted: 17th July 2020 10:22

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.

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 percent 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 percent VAT rate whereas in Singapore the rate is set at seven percent.

Appointment of VAT collectors

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

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

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:

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:

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 in ChinaHong KongVietnam, Singapore, India, and Russia. Readers may write for more support.

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