Indonesia is imposing a 10% VAT rate on digital goods and services from July 1 2020. The VAT will be collected by non-resident entities who are selling digital goods or services to buyers located in Indonesia and will apply to both B2C and B2B services.
The new VAT levy will be imposed from the 1 July 2020. The regulations set out various collection mechanisms as well as grant the Director General of Tax (DGT) the power to appoint international digital or platform providers as VAT collectors.
Who Needs to Register for VAT in Indonesia?
Indonesia’s DGT will identify and register the following businesses as VAT collectors if they exceed certain thresholds within transaction value and traffic or access numbers in a 12-month period. VAT collectors are considered as:
- International sellers;
- Foreign service providers;
- Both local and foreign e-commerce platform providers.
Although the DGT will identify and automatically register certain digital service providers, other companies that exceed the above thresholds will be able to voluntarily for VAT.
What are the new VAT obligations in Indonesia?
The VAT collection obligations in Indonesia include:
- Collecting VAT at a rate of 10% of the transaction value on the payment date.
- Issuing VAT receipts.
- Paying VAT to the State Treasury on a monthly basis.
- Reporting transactions to the DGT on quarterly basis.
- There may also be a requirement to provide a summary of transactions on an annual basis.
The VAT obligations start at the beginning of the month that follows the date of appointment as a VAT collector.
Risks of Non-compliance
The regulations do not stipulate any potential consequences for companies who exceed the thresholds but do not voluntarily register. However, not following the new regulations could lead to adverse consequences such as administrative tax penalties, issuance of warnings and the termination of internet access.
Register for VAT in Indonesia
Does your digital services business need to register in Indonesia? Are you meeting the above thresholds? Vatglobal can help you find out what you need to do to remain compliant and avoid penalties. We’re able to offer an end-to-end registration and compliance service.