Ever since the famous case between the Indonesian government and an international leading search engine company back in 2016, the government has been planning to issue an underlying regulation as a basis to tax trading of goods and services via online platform. This was initially planned to be accommodated in a Bill on the Taxation Provisions and Facilities for Strengthening the Economy or commonly known as the Taxation Omnibus Bill. Nevertheless, the implementation on the taxation to tax trading of goods and services is expedited due to the Covid-19 situation. The Minister of Finance stipulates that the Covid-19 situation increases demand for online trading and therefore, it is necessary to accelerate the implementation of this regulation for the State’s interest. The Government has issued the Law and several implementing regulations to be used for the basis of taxing the trading of goods and services via online platform, among others:
The next section will provide general overview on the taxation regulation for Electronic System Trading (EST) under Indonesian laws.
What is Taxable for the EST Transactions?
Pursuant to Law 2, the EST Transactions can be taxed for:
PMK 84 regulates that the rates to be imposed in the Utilization of Intangible Taxable Goods and/or Taxable Services from Outside of Customs Area in the Customs Area through the EST is 10% of the purchase price (pre-VAT amount), which shall be collected on the payment of the transaction by the customers.
Both the income tax and electronic transaction tax will be calculated against the amount received by the foreign tax subject for the goods/services sold through the EST. The difference between them is that the electronic transaction tax will be imposed to foreign tax subjects which country of origin has tax treaty with Indonesian government that prohibits the Indonesian government to stipulate the foreign tax subjects as a permanent establishment in Indonesia. Hence, the electronic transaction tax will only be imposed to the foreign tax subjects if they cannot be stipulated as a permanent establishment due to tax treaty – otherwise, the income tax will be imposed.
Law 2 stipulates that further regulation on among others the rates and calculation of the income tax and electronic transaction tax will be further governed in a government regulation. Up to the date of this article, the Government has not enacted any government regulation yet for the guidelines on the imposition of income tax or electronic transaction tax for the EST transactions. Therefore, this article will focus more on the imposition of VAT for EST transactions.
Who (or what) is the Subject of the Taxable EST Transactions?
Law 2 stipulates that the Value Added Tax (VAT) will be imposed to the utilization of the intangible taxable goods and/or services in the Customs Area (Indonesia) through the EST transactions. The regulation under this Law is an extension of the imposition of value added taxes as previously regulated under the VAT and Luxury Good Tax Laws (VAT Law).
On the other hand, the Income Tax or the Electronic Transaction Tax for the EST transactions will be imposed to foreign (i) merchants, (ii) services providers, and/or (iii) EST providers who fulfil the criteria of significant economic presence in Indonesia, based on the income that they generate from the EST transactions.
Who is Obliged to Collect the VAT for the EST Transactions?
PMK 48 regulates that the VAT for the EST transactions must be collected by either (i) foreign merchants, (ii) foreign services providers, (iii) foreign EST providers and/or (iv) domestic EST providers who are appointed by the Directorate General of Taxation (the VAT Collector). PER 12 further stipulates that in order to be appointed as a VAT Collector (or voluntarily register themselves as VAT Collector to the Directorate General), they must fulfill the following criteria:
Based on the information on the website of Directorate General of Taxation, the Directorate General has appointed 28 companies as a VAT Collector, among others: Google LLC, Linkedin Singapore Pte. Ltd, Zoom Video Communications, Inc., PT Shopee International Indonesia and Skype Communications SARL. Upon the appointment, the VAT Collector will be given a VAT Collector identity number and it must activate and update its information on the System provided by the Directorate General for VAT Collector (VAT Portal).
On the case where either the (i) foreign merchants, (ii) foreign services providers, (iii) foreign EST providers and/or (iv) domestic EST providers where the EST transactions occur has not been appointed as the VAT Collector, PMK 48 stipulates that the VAT is still outstanding and shall be collected, deposited and reported by the Indonesian consumers, as regulated under the VAT Law. Indonesian customers are customers who:
What are the Obligations of VAT Collector?
Once appointed (or voluntarily register) as a VAT Collector, it will have the following obligations:
Is there any Other Thing to Note?
In order to increase the service to the taxpayer and considering the development of information technology, the Directorate General issues Directorate General of Taxation Regulation Number PER-11/PJ/2019 of 2019 on Taxation Application Service Providers (as lastly amended by Directorate General Regulation Number PER-10/PJ/2020 of 2020), which enables the Directorate General to conduct a partnership with application service providers in providing taxation services. After appointed by the Directorate General, the application service providers must provide application which performs the following services:
*Ali Budiardjo, Nugroho, Reksodiputro, Counsellors at Law in Jakarta
Freddy Karyadi, Partner
M +62 818 103 949
T +62 81910103949
Professional qualifications. Indonesia, Solicitor; Law, University of Indonesia, 1998; LLM in International Tax, Leiden University, 2002
Anastasia Irawati, Senior Associate
Professional qualifications. Indonesia, Solicitor; Law, Parahyangan Catholic University, 2011; LLM in Corporations Law, New York University (NYU) School of Law, 2016