The Minister of Finance of Indonesia has issued a new regulation known as MOF Regulation No. 48/PMK.03/2020. The regulation concerning Value Added Tax (VAT) on Imported Digital Products in Indonesia will be fully applicable in August 2020, after the nomination from the Indonesian Government in July 2020.
As such, foreign companies or businesses that sell digital products (goods or services) online or through an electronic system to Indonesian consumers are required to pay for the VAT.
The trade activities covered under this new regulation include streaming, downloading or subscription of books, movies, music, software, applications and the such, as well as online services that may include broadcasting, video conferencing, voice recording, advertising and marketing.
Who is Considered an Indonesian Consumer?
A consumer is considered Indonesian when s/he meets one of the following criteria:
- A billing or mailing address in Indonesia is provided for the account
- For the payment, a credit or debit card used is issued by a financial institution in Indonesia
- The customer places an order using an Indonesian IP address or local calling code
Which Sellers can Collect Indonesian VAT?
According to the Directorate General on Taxation, the sellers of digital goods and services that fall into the following categories should collect the Indonesian VAT (10% rate):
- Foreign merchants or online retailers selling digital goods and services to Indonesian consumers
- Foreign operators of online marketplaces supplying digital goods and services to Indonesian consumers
- Indonesian operators of online marketplaces supplying foreign digital products to Indonesian consumers
Furthermore, the sellers should also meet the following requirements:
- Sales amount in Indonesia is more than IDR 600 million/year or IDR 50 million/month, and/or
- The traffic is more than 12,000/year or 1,000/month
Taking into account the requirements, the nominated companies that are liable for paying the VAT include Netflix, Amazon Web Services Inc, Google Asia Pacific Pte. Ltd, Google Ireland Ltd, Google LLC and Spotify AB.
The seller may appoint a Representative Party in Indonesia to fulfill this compliance technically. Technical appointment, technical payment and submission will be regulated further.
Violating the regulation will result in the following penalties:
1. General tax penalties that are applicable in Indonesia for late payment and late reporting.
2. Blocked access of online services after the issuance of a warning letter for a particular time, which is to be determined further.
Technical Guideline on VAT Compliance in Indonesia
- VAT Collection: on a per transaction basis (whenever there is transaction then the Digital Business Provider (DBP) should bill the customer with VAT)
- VAT Payment: is done monthly, the deadline is end of following current month (for example: deadline for August period is end of September)
- VAT Return/Reporting: is done quarterly, the deadline is following month of last month of current quarter (for example: deadline for quarter period August – October is end of November)
Quarter term is definitive based on calendar, not based on the month where the DBP is starting the compliance:
- Q1 = January – March
- Q2 = April – June
- Q3 = July – September
- Q4 = October – December
How Cekindo can Assist
We understand that getting familiar with the legal system or a new regulation that is unfamiliar to many foreign entrepreneurs in Indonesia can be tiresome.
That is why Cekindo exists. Our team of professional business consultants and legal experts focus on business and legal consultation, and we are strategically positioned to provide expert and high-quality services to individuals and business entities of all sizes.
Cekindo is a one-stop solution for all your business and legal needs, by combining our consulting skills and in-depth knowledge of the market and up-to-date regulations with innovation, local expertise, and creativity to provide you with the most accurate information and ideal solution for you.
Do you need assistance with or would you like to know more about VAT compliance in Indonesia? Ask for advice from our specialists now by filling in the form below. We look forward to assisting you.