Indonesia imposes VAT on imported digital supplies
Jeklira Tampubolon and Aditya Nugroho of GNV Consulting lay out the rules regarding the upcoming imposition of VAT on the use of intangible goods and taxable services imported into Indonesia via electronic systems.
The use of intangible goods and services from outside the customs territory within Indonesia through electronic systems (Perdagangan Melalui Sistem Elektronik – PMSE) has significantly increased. The prevailing VAT regulations do not stipulate a mechanism to impose VAT on the use of digital intangible goods and services through PMSE.
To provide fairness of the VAT treatment for digital and non-digital intangible goods and services, the Ministry of Finance has issued regulation No. 48/PMK.03/2020 dated May 5 2020 concerning the procedures for appointment of collectors, collection, and payment. Moreover, the regulation also refers to the reporting of VAT on the use of intangible goods and taxable services from outside the customs territory within Indonesia through electronic systems (PMK-48). PMK-48 becomes effective from July 1 2020.
The summary of PMK-48 is as follows:
Objects of offshore VAT
VAT shall be imposed on the use of intangible goods and services from outside the customs territory within Indonesia through PMSE.
The use of intangible goods and taxable services in this context includes the utilisation of digital goods (e.g. movie, music, computer software, mobile applications, games, electronic book, magazine, comics, etc.) and digital services (e.g. web hosting, video conferencing services).
PMSE VAT collection
The VAT on the use of digital intangible goods and services through PMSE (PMSE offshore VAT) shall be collected, paid and filed by the appointed individual or entity conducting business through PMSE (PMSE VAT collector).
The PMSE offshore VAT payable on direct transactions between an overseas seller or service provider and a buyer or service user shall be collected, paid and filed by the said seller or service provider that is appointed as a PMSE VAT collector.
In the event that the overseas seller or service provider conducts transactions through an offshore or domestic PMSE operator (PPMSE), the PMSE offshore VAT can be collected, paid and reported by an offshore seller, service provider, or offshore or domestic PPMSE that has been appointed as a PMSE VAT collector.
The PMSE offshore VAT payable other than those collected by the appointed PMSE VAT collector shall be collected, paid and reported by the buyer or servicer user through the self-assessment mechanism (self-assessed PMSE offshore VAT).
PMSE VAT collector
The PMSE VAT collector is appointed by the Minister of Finance and delegated to the Director General of Tax (DGT). However, if the PMSE business (individual or entity conducting business through PMSE) has met the criteria as PMSE VAT collector but has not been officially appointed as a PMSE VAT collector by the DGT, the PMSE business may submit a notification to the DGT to be appointed as a PMSE VAT collector.
To be appointed as a PMSE VAT collector, the individual or entity should meet the following criteria:
a. The value of transactions with Indonesian buyers or service users exceeds a certain amount within 12 months; and/or
b. The amount of traffic or access has exceeded a certain figure within 12 months
The transaction value and amount of traffic or access (threshold) shall be stipulated by the DGT.
Buyer or service user
a. Residing or domiciled in Indonesia
b. Making payments using debit, credit or other payment facilities provided by Indonesian financial institutions; and/or
c. Transactions using internet protocol (IP) addresses in Indonesia or using telephone numbers with an Indonesian country code.
The PMSE offshore VAT is payable at the payment date by the buyer or service user. The payment due date of PMSE offshore VAT is at the end of following month after the VAT becomes payable.
The PMSE VAT collector is required to issue VAT collection evidence, which could be in the form of commercial invoice, billing, order, receipt or other document that states the collection and payment of VAT. Such VAT collection evidence is treated as equivalent to a VAT invoice.
The PMSE VAT collector is required to report the VAT collected quarterly, no later than the end of the following month after the end of the quarter period (January 31, April 30, July 31 and October 31).
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