Technology, Media & Telecommunication
Digital Businesses Tax Obligation

Who and What is Obligated?

29 July 2020

In continuation of our previous article titled ‘Government Officialization on Overseas Digital Business Tax Obligations[1], the Directorate General of Taxes (“DGT”) has enacted Government Regulation No. PER-12/PJ/2020 on Certain Criteria relating to Appointment of Collectors, Collection, and Deposit, and Reporting of Value Added Tax in the Utilization of Intangible Taxable Goods and/or Taxable Services from Outside of Customs Area in the Customs Area Through Trade via Electronic Systems (“PER-12/PJ/2020”). Since 1 July 2020, overseas Digital Businesses such as Netflix, Spotify, and any other foreign services are subjected to electronic tax due to sales of digital products by overseas sellers to consumers within the customs area of Indonesia. Foreign OTT services will be charged with a Value Added Tax (or locally known as Pajak Pertambahan Nilai) (“VAT”) of 10% from the transaction value as per the taxation polices of the DGT. This VAT rate is applied at the point-of-sale against the taxable amount which is the amount payable by the customer before any taxes.


Whilst PMK 48/2020 is the implementing regulation specifically for Article 6 Paragraph 13(a) of Perppu 1/2020[2], the significance of PER-12/PJ/2020 provides the awaited further clarification on the vague criterion that was stipulated in PMK 48/2020. To re-cap our previous article, below is vital information that must be taken into consideration before comprehending PER-12/PJ/2020.


Trade through electronic systems (“PMSE”) business actors, are any individual person or business entity that conducts business activities in the PMSE sector, which includes:

  • Overseas Merchants or Overseas Service Providers selling digital goods or services; and
  • E-Commerce Organizers (within Indonesia or overseas) selling digital products from outside Indonesia customs area.


Who are considered ‘Indonesia Customers’


PMK 48/2020 established the criterion in identifying which subjects are considered Indonesian customers:

  • Customers providing billing addresses or mailing addresses within the territory of Indonesia;
  • Customers utilizing payment facilities issued or provided by Indonesian financial institutions in order to make payment; and/or
  • Customers placing digital orders and transactions using Indonesian IP addresses or using Indonesian telephone calling codes.


Products/Services recognized by PMK48/2020


Digital products include but are not limited to:

  • Movies, music, and other audio-visual contents;
  • Computer software, mobile apps, games; and
  • Electronic books, magazines, and comics.


Digital Services include but are not limited to:

  • Web hosting;
  • Videoconferencing services; and
  • Other services delivered through computer networks.


For the ease of reference, we have dissected PER-12/PJ/2020 and provided below clarifications on specific criterions that encapsulates who shall be subjected to this regulation and the relevant procedures.


Appointment of E-Commerce VAT Collector


The DGT shall issue a decree appointing PMSE Business Actors(s) who fulfils certain conditions (which are referred to as PMSE VAT Collectors or “PVC”) to collect, deposit and report the VAT on the use of Taxable Goods (“BKP”) and/or Taxable Services (“JKP”) from outside the Customs Area to inside the Customs Area through PMSE.


PMSE business actors are to be appointed as PVCs should they fulfil the following criterion:


  • Transaction value with an Indonesian Buyer above IDR 600,000,000 (six hundred million Rupiah) within 1 (one) year, or IDR 50,000,000 (fifty million Rupiah) within 1(one) month; and/or


  • Amount of traffic or access that exceeds 12,000 (twelve thousand) within 1 (one) year or 1,000 (one thousand) within 1 (one) month.


PMSE Business Actor(s) that have fulfilled the above criterion but have not been appointed as a PVC by the DGT may deliver notice to the DGT to be appointed as a PVC through email or other acknowledged means of communication as per Article 5 of PER-12/PJ/2020.


VAT Collection


The amount that the PVC is obligated to collect is 10%, wherein evidence of such collection may be in the form of a commercial invoice, billing, order receipt or any other documentation that states that VAT collection and payment has been made.


VAT Depositing


The PVC is required to deposit the VAT collected for each Tax Period, which is defined as 1 (one) calendar month, into a state account through a bank/post or other authorized institutions at the end of the following month subsequent to Tax Period end. The deposit of the VAT can be in the Indonesian Rupiah, United States Dollar, or other foreign currencies determined by the DGT.


Reporting of VAT


PVCs are obligated to report the collected VAT on a quarterly basis for 3 (three) Tax Periods, and at the latest, at the end of the month after the quarter period ends. The reporting of the VAT must at the minimum stipulate: a) number of buyers; b) payment amount, not including the VAT collected; c) the amount of VAT collected; and d) the amount of VAT stored, for every Tax Period.


Sanctions of Incompliance


It is entirely clear now with regards to the obligations that PVCs (appointed or self-registered) must adhere to. In any case that the PVC does not comply or fails to report or deposit the collected VAT within the specified time pursuant to PER-12/PJ/2020 and PMK 48/2020, the PVC may be subjected to administrative penalties in accordance with the tax laws and regulations and even further penalties such as termination of access.


With clarity provided by PMK 48/2020 along with PER-12/PJ/2020, overseas digital business and any PMSE Business Actors involved in the Intangible taxable goods and/or taxable services from outside Indonesia within the borders are now required by law to adhere to such regulations. PER-12/PJ/2020 also contains attachments that provide the procedure to register as a PVC. The continuous increase of E-Commerce trading and dramatic shifts towards overseas OTT service providers due to Covid-19 justifies the government’s collection of VAT as this holds foreign digital businesses obligated. However, the efficiency and practicality of such VAT collection, deposits, and reporting will only be truly visible after numerous tax periods.


If there are any queries with regards to how this may affect your business, please contact us for further legal consultation.


This information does not, and is not intended to, constitute as legal advice; instead, all information, content, and materials are for general information only.


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[1] Please refer to our article titled ‘Government Officialization on Overseas Digital Business Tax Obligations’.

[2] Ibid.