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Jakarta Post

Government unveils criteria for tech firms to collect VAT

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Tue, June 30, 2020   /   03:19 pm
Government unveils criteria for tech firms to collect VAT Smartphones and mobile apps have become inseparable from daily life. (Shutterstock/File)

The Taxation Directorate General has unveiled the criteria for technology firms expected to collect value-added tax (VAT), including the transaction value and traffic, as the government ramps up efforts to increase state revenue during the coronavirus epidemic.

According to a regulation unveiled by the tax office on Tuesday, technology firms with total transaction value of more than Rp 600 million (US$41,949) and with customer traffic of more than 12,000 per year are obliged to collect VAT from their Indonesian  customers.

“According to the criteria, the appointment of VAT collector would depend on the transaction value or traffic from Indonesian [customers] without consideration of the companies’ jurisdiction,” the tax office statement reads.

Over-the-top (OTT) technology firms appointed by the tax office as VAT collectors in July are expected to start collecting the taxes in August. Consumers using digital goods or services from the technology firms are obliged to pay 10 percent VAT with the regulation enforcement.

Law No. 2/2020 stipulates that the government is able to charge VAT on taxable intangible goods and/or services sold through e-commerce platforms. It can also charge income tax or electronic transaction tax on e-commerce operated by foreign individuals or digital companies that have a significant economic presence.

The government has been struggling to collect revenue to fund its cash-strapped budget as the COVID-19 pandemic hits almost all business sectors. Ministry data shows state revenue reached Rp 664.3 trillion as of May, down 9 percent year-on-year (yoy), as tax income dropped 10.8 percent yoy to Rp 444.6 trillion.

It has pressed ahead with collecting digital tax despite an announcement by the United States Trade Representatives (USTR) that it will investigate such policy, which the US said was aimed squarely at its technology giants.

However, the government has maintained that the VAT is not the subject of an investigation by the US, which is focusing more on corporate income tax plans for technology companies, a topic of discussion led by the Organization for Economic Cooperation and Development (OECD).

Previously, tax office chief Suryo Utomo said six OTT technology firms were ready to collect VAT from consumers, adding that the office was also in talks with several other firms.

“We will announce the firms that will collect VAT on digital goods and services in early July,” Suryo told reporters during a streamed news conference on June 25.

Finance Minister Sri Mulyani Indrawati has repeatedly mentioned that the government is targeting streaming platform Netflix, music streaming service Spotify and videoconferencing application Zoom.