VAT on Imported Digital Products

From 1 July 2020 Indonesian value-added tax (VAT) applies to sales of digital products supplied by foreign businesses to Indonesian consumers.

Examples of these sales include downloading or streaming of apps, books, computer software, games, magazines, movies, music, and newspapers, as well as the subscription of such products. Online services such as advertising, design, marketing, and video conferencing services are also examples of digital products covered by this measure.

Overseas businesses that make sales like those described above and meet certain criteria will be appointed as VAT collectors by the Indonesian Government and be responsible for:

  • charging VAT on sales of digital products

  • making a monthly payment to the Indonesian Government, and

  • submitting a quarterly VAT return to the Indonesian Directorate General of Taxes (DGT)

The criteria to be appointed as VAT collectors are:

  • the value of transactions with buyers in Indonesia exceeds IDR 600,000,000.00 in 1 year or IDR 1,000,000.00 in 1 month; and / or
  • the amount of traffic or access in Indonesia exceeds 12,000 in 1 year or 1,000 in 1 month.

The applicable VAT rate is 11 percent. This means the VAT amount on a taxable sale will be 1/11th of the price the Indonesian customer pays.

Who charges VAT

Sellers of digital products who might need to charge Indonesian VAT include:

  • overseas merchants or online retailers who sell digital products to Indonesian consumers
  • overseas operators of online marketplaces who supplies digital products to Indonesian consumers
  • Indonesian operators of online marketplaces who supply foreign digital products to Indonesian consumers

A customer is considered Indonesian if the customer:

  • provides an Indonesian billing address or mailing address for his account with the seller
  • uses payment facilities such as credit or debit cards issued by Indonesian financial institutions, and/or
  • places orders using Indonesian IP addresses or country calling code.

More information about:

Merchants or Online Retailers

If you sell digital products directly to Indonesian consumers, you might be required to inform the DGT so you can be appointed as a VAT collector.

For sales made through an online marketplace and the marketplace's operator has been appointed as a VAT collector, the operator will be responsible for the VAT on these sales.

If the marketplace operator has not been appointed as a VAT collector, you will need to inform the DGT.

The obligation to charge VAT commences the month following your appointment as a VAT collector.

All VAT collected during a month must be paid to the Indonesian Government by the payment due date which is the end of the following month.

A quarterly VAT return must be submitted by the filing due date, which is the end of the month following the end of the quarter.

Example:

MovieStreaming Ltd, a merchant in the United Kingdom, satisfies the threshold requirements, and the Director-General of Taxes on 10 July 2020 appoints MovieStreaming Ltd. as a VAT collector.

From 1 August 2020 all sales made by MovieStreaming Ltd to Indonesian customers are taxable sales.

On 1 August 2020, Nadya, an Indonesian customer buys a digital product from MovieStreaming Ltd. The seller must charge Nadya a price that includes the VAT. If the price of the product before VAT is $30, then MovieStreaming Ltd. should charge Nadya $33 which includes a $3 VAT component.

MovieStreaming Ltd. must pay the VAT it collects in August 2020 by the payment due date, which is the end of the following month namely 30 September 2020.

The VAT collector must also submit its VAT return for August to September 2020 in the quarterly report (period July to September 2020) by the filing's due date, which is the end of the following month namely 31 October 2020.

Online Marketplace Operators

An online marketplace operator is an entity which provides the electronic communication service that allows overseas merchants to make sales of digital products to Indonesian customers.

Examples of online marketplaces are online marketplace websites and mobile application stores.

If you operate such service, you might be liable to charge Indonesian VAT on sales made to Indonesian consumers through your service.

Example:

Top Games Ltd., a merchant in China, satisfies requirements to be appointed as an Indonesian VAT collector. It sells its games through Global Store, a United States online marketplace.

Global LLC the marketplace operator has been appointed as an Indonesian VAT collector.

Fajar, an Indonesian customer, uses Global Store marketplace to buy a digital product from Top Games Ltd. The price of the product before taxes is $20.

Global LLC is responsible for the VAT on the sales, and must, therefore, charge Fajar $22 including $2 in VAT.

Top Games Ltd. is not responsible for any VAT payable on the sale.

 

Your obligations as VAT collector

An appointed VAT collector must charge Indonesian VAT on sales of digital products to Indonesian consumers.

You must begin to charge VAT on sales you make from the first day of the month following your appointment as a VAT collector.

The applicable VAT rate is 10 percent of the pre-tax amount.

The amount of VAT you collected during a month must be paid to the Indonesian Government by the end of the following month.

You are required to submit a quarterly VAT return by the end of the month following the end of the quarter.

In special cases, the Director-General of Taxes may require a VAT collector to furnish a more detailed report covering a period of one calendar year.

 

Other Resources

 

Regulations:

 

Presentation Slide

 

Q&A

 

Watch webinar explaining the new law

 

Updated: 17062020

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