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Indonesia Introducing VAT on Digital Supplies from July 2020

Indonesia's Directorate General of Taxation announced on 15 May 2020 that supplies of digital goods and services from abroad to domestic consumers will be subject to VAT at the rate of 10% with effect from 1 July 2020. The rules on the collection of VAT are provided by Regulation No. 48 /PMK.03/2020, which regulates new measures for the taxation of electronic transactions (referred to as "PMSE") that were introduced by Government Regulation (in Lieu of Law) No. 1 of 2020, issued in March. With these provisions, digital products such as streaming music subscriptions, streaming films, digital applications, and games, as well as online services from abroad will be treated the same as domestic products, including similar digital products produced by domestic businesses.

PMSE businesses that meet certain transaction value criteria or the amount of traffic within 12 months will be designated by the Minister of Finance through the Directorate General of Taxation as a VAT collector. Businesses that have met the criteria but have not been designated as VAT collectors should submit notifications online to the Directorate General of Taxation. The exact criteria and the businesses designated will be provided at a late date.

As with domestic VAT collectors, designated PMSE businesses will be required to remit and report VAT.  VAT collected from consumers will need to be remitted no later than the end of the following month, while reporting must be completed quarterly no later than the next month after the quarterly period ends.

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