Imposition of Value Added Tax for Commercial Transactions through Electronic System

Indonesia has recently imposed Value Added Tax (“VAT”) to any commercial transactions through the electronic system/Perdagangan Melalui Sistem Elektronik (“PMSE”). The new Directorate-General of Taxes (“DGT”) regulation requires a PMSE operator to collect, paid, and report the VAT to the relevant tax authorities effectively by 1 July 2020.

Legal Framework: In preparing the below executive summary, we refer to the following prevailing laws and regulations:

  1. Minister of Finance (“MoF”) No. Regulation 48/PMK.03/2020 on Procedures for the Appointment of Collectors and for the Collection, Deposit and Reporting of Value-Added Tax for the Utilization of Taxable Intangible Goods and/or Taxable Services from Outside of Customs Areas within Customs Areas via Electronic Trading Systems (“MoF Regulation 48/2020”); and
  2. DGT Regulation No. PER-12/PJ/2020 on the Thresholds of the Collectors and the Appointment of Collectors, Collection, Remittance, and Filing of Value Added Tax on the Utilization of Intangible Taxable Goods and/or Taxable Services from Outside of the Customs and Excises Territory Within the Customs and Excises Territory Through Electronic Trading Systems (“DGT Regulation 12/2020”).

Main Keys on the Imposition of PMSE VAT for Commercial Transaction through Electronic Systems: Please find the below main keys of the imposition of VAT for commercial transactions through the electronic systems.

Scope of Transactions Subjected to VAT: We note that any transactions of intangible goods and services from outside Indonesia to Indonesian customers through electronic systems are now subjected to VAT. (Art. 2 (1) jo. Art 6 (1) of MoF Regulation 48/2020).

Therefore, started from 1 July 2020, the purchase of various digital products such as streaming music and movie subscription, applications, games, and online services will be inflicted on 10% VAT.

Appointment of PMSE VAT Collectors: We note that the DGT will appoint PMSE organizers who fulfill the following criteria as VAT Collectors: 

  1. Minimum transaction of IDR 600 million/year or IDR 50 Million/month; and/or
  2. The number of users in Indonesia is exceeding to 12,000 users/year or 1,000 user/month (Art. 4 of DGT Regulation 12/2020).

However, we also note that companies that have not yet appointed by DGT can choose to be a collector by sending a notification to the DGT. Such notifications are delivered via email or designated application or system provided by DGT (Art. 5 (2) DGT Regulation 12/2020).

Collection of PMSE VAT: Any PMSE VAT collector must deposit the collected VAT of each tax period no later than the end of the following month after such period ends. The VAT deposit shall be made electronically to the State Treasury through a perception bank in the form of Indonesian Rupiah, United States Dollar (USD), or other foreign currencies as determined by DGT. (Art. 8 (1), (2), and (3) of MoF Regulation 48/2020).

Mandatory PMSE VAT Reporting: VAT collectors should submit 2 (two) reports, which are:

  1. Mandatory Quarterly PMSE VAT Return/SPT Masa PPN PMSE: The quarterly report shall at least includes: (i) the number of customers; (ii) the total payment amount; (iii) total amount of PMSE VAT collected; and (iv) the amount of PMSE VAT settled to the State Treasury (Art. 9 (1) and (2) of MoF Regulation 48/2020).
  1. Annual PMSE VAT Report/Laporan Tahunan PPN PMSE: The tax office may request PMSE operator to submit an annual report which consists of: (i) the number and date of the PMSE VAT evidence; (ii) the amount of tax base for each of the PMSE VAT collection; (iii) the amount of PMSE VAT for each of PMSE VAT collection; (iv) the name and taxpayer identification number/Nomor Pokok Wajib Pajak (“NPWP”) of the customer (Art. 10 (1) and (2) of MoF Regulation 48/2020). 

As an additional note, the above reporting shall be submitted through DGT’s online application or system (Art. 9 (3) jo. Art. 10 (3) MoF Regulation 48/2020).

The article above was prepared by Marshall S. Situmorang (Partner) and Aniendita Rahmawati (Associate). 

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances. For more information, please contact us at mail@nusantaralegal.com.