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Indonesia: More tech companies told to collect VAT

If you provide digital services to customers in Indonesia, the tax authorities are likely paying close attention to your business.

Indonesia’s tax authorities have provided an updated notice listing which companies must collect VAT on digital services and goods supplied via the internet. 94 companies have been designated to collect VAT. The updated list includes Airbnb, Elsevier and Booking.com.

Digital VAT in Indonesia

Indonesia introduced VAT on digital services in 2020. In terms of the new regulations, non-resident businesses that sell digital goods or services to buyers located in Indonesia must collect VAT on goods sold to customers in Indonesia.

Initially, the list of designated providers was relatively small. There are now a considerably higher number of non-resident companies responsible for collecting VAT .  

Which companies must collect VAT? 

As in many countries, Indonesian authorities have noted a sharp recent rise in the provision of electronic services (designated in Indonesia as PMSE) to Indonesian customers by companies based overseas. 

Indonesia’s digital services VAT aims to create a more level playing field for local and foreign digital services providers. 

Under the regulations, Indonesia’s Director General of Tax appoints specified non-resident businesses as PMSE VAT collectors.

In order to become eligible to be appointed as a PMSE VAT collector the company must either exceed the specified annual revenue threshold and/or exceed the specified online traffic threshold. 

Note that a company only need to meet one of those criteria. Companies should therefore pay careful attention to Indonesian user data, as well as revenue figures.

Businesses that are uncertain about their potential VAT obligations in Indonesia should thus consult with a global VAT specialist. 

Digital VAT: the new global norm

As more countries implement digital services VAT, businesses that offer streaming services, online education, gaming or other digital services need to be increasingly aware of their global VAT compliance obligations. 

Note, however, that the precise definition of a ‘digital service’ varies from country-to-country. Moreover, the criteria and thresholds for VAT registration are different in each jurisdiction. Understanding when and where you have VAT obligations is therefore often very complex. 

How can businesses ensure they are 100% global compliance and avoid costly penalties? You need a holistic VAT solution that makes global compliance simple and efficient. 

 

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