Implementing regulation issued on VAT treatment of e-commerce transactions
On 30 March 2022, Indonesia’s Ministry of Finance (MoF) issued an implementing regulation to the Tax Harmonization Law that provides details and guidance on the VAT treatment of trading through electronic systems. VAT has applied to intangible digital goods and services supplied into Indonesia by overseas providers since 1 July 2020 (for prior coverage, see the article in the March 2021 issue of Indirect Tax News).
The salient points of the regulation, which is effective as from 1 April 2022, are as follows:
- The VAT rate increased from 10% to 11% and will increase to 12% by 1 January 2025.
- VAT is imposed on the use of intangible goods and/or services supplied to Indonesian customers through an e-commerce platform from outside Indonesia’s customs area to within the customs area.
- Intangible goods and/or services for these purposes are defined as digital goods and services that include:
- The use or the right to exercise a copyright in the field of literature, art or scientific works, patents, designs, models, plans, secret formulae processes, trademark, industrial property rights, etc.;
- The right to use industrial, commercial or scientific tools and equipment;
- The right to use motion picture films, video tapes or sound tapes; and
- The acquisition of all rights relating to intellectual property and industrial property rights.
- A user or customer is a person who:
- Lives in or is domiciled in Indonesia;
- Makes payments using debits, credits or other payment methods provided by Indonesian institutions; and/or
- Enters into relevant transactions using an Indonesian internet protocol (IP) address or an Indonesian telephone number.
- The Directorate General of Taxes (DGT) will appoint a foreign provider of a digital market place as a collector of the 11% VAT on intangible digital goods and services where:
- The transaction value of goods and/or services supplied in Indonesia exceeds IDR 600 million in one year or IDR 50 million in one month; and/or
- The amount of traffic or the number of users in Indonesia exceeds 12,000 in one year or 1,000 users in one month.
- The regulation contains additional guidance on how e-commerce VAT collectors issue commercial invoices, carry out billing, and order receipts or similar documents.
- E-commerce VAT collectors must submit a quarterly VAT report by the end of the month following the end of each quarter. However, VAT must be settled with the Indonesian State Treasury on a monthly basis by the end of the following month. VAT due can be paid in IDR, USD or other currency stipulated by the DGT. The VAT report must include the number of customers or users, and the amount of VAT collected and paid to the State Treasury, supported by a tax payment slip.