 |
Since the officiation of Government Regulation in Lieu of Law No.1 of 2020 (“Perppu 1 /2020”), the Ministry of Finance has recently enacted implementing government regulation Number 48/PMK.03/2020 of 2020 on Procedures for the Appointment of Collectors, Collections, and Deposits, as well as the Reporting of Value Added Tax for the Utilization of Non-Material Taxable Goods and/or Taxable Services from Outside of Customs Territory to Within Custom Areas Through Trade via Electronic Systems (“PMK 48/2020”). PMK 48/2020 is the implementing regulation specifically for Article 6 Paragraph 13(a) of Perppu 1/2020 which stipulated that future regulations would be enacted to clarify procedures.
Due to social restrictions and several measures implemented by businesses (e.g. working from home), the government have noted there has been an increasing of the number of uses of overseas OTT service providers in the midst of Covid-19, for instance, the use of Netflix, Spotify and Zoom. This awaited implementing regulation finally establishes the appropriate procedures on how the government can hold overseas OTT service providers accountable and obligated to abide by taxation requirements. This is seen to be essential as imports of digital products by Indonesian consumers do not include VAT, where the governments views this as an uneven playing field for domestic businesses.
Who are considered ‘Indonesia Customers’
PMK 48/2020 has finally established the criterion in identifying which subjects are considered Indonesian customers:
Products/Services recognized by PMK48/2020
Digital products include but are not limited to:
Digital Services include but are not limited to:
Electronic Tax Obligations and Procedures
From the 1 July 2020, overseas Digital Businesses such as Netflix, Spotify, Amazon, and any other foreign services will now be 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 Directorate General of Taxes. 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.
Trade through electronic systems (“PMSE”) business actors, are any individual person or business entity that conducts business activities in the PMSE sector, which includes:
Director General of Taxes will appoint PMSE business actors who fulfil certain conditions (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 that are appointed as PVCs are determined by these criterions: transaction value in Indonesia; and/or amount of traffic or access. PVCs that have fulfilled the above criterion but are not appointed as a PVC may deliver notice to the Director General of Taxes to be appointed as a PVC.
An appointed PVC will then be given an identity number as administrative means used for an identification card of the PMSE VAT Collector in exercising rights and fulfilling tax obligations. PVCs are also required to provide evidence of the collected VAT in the form of commercial invoice, billing, order receipt, or similar document, which states VAT collection and payment has been made.
PVCs are also obligated to deposit the VAT collected every tax year, where it must be paid at the very latest before the end of the following month after the end of the tax year. PVCs are also required to report and submit VAT reports that has been collected and stored on a quarterly basis for a period of 3 (three) tax years, and at the latest the following month after the quarter period ends. The Director General of Taxes may also require the PVCs to provide a further detailed report covering a period of one calendar year.
Sanctions
Violation to any of the above taxation obligations may potentially lead to administrative sanctions and/or access termination upon the digital businesses by the Ministry of Communication and Informatics. However, a specific regulation stating sanctions are yet to be established so attentiveness to new further regulations dictating such must be maintained.
There is no transitional period stipulated under the regulation, it will be effective immediately on 1 July 2020 and as such overseas digital businesses should stay alert and observant as to the new tax obligations of the electronic tax.
Closing Remarks
Taxation on the utilization of overseas digital products are said to have been enacted by the government to ‘level the playing field’ of all business actors in and outside the Indonesia. The government’s utilisation of the collections of VAT are also capable of increasing state revenue which is currently extremely important as a source of state funding to cope with the economical impact of Covid-19.
Whilst there is not yet specific elaborations on the threshold of determining a PVCs, PMK 48/2020 does however provide clarification on the specific periods of tax obligations and procedures. It is only a matter of time until further regulations dictating other relevant information are enacted.
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.
