Digital Tax Questions and Answers

The criteria of Digital Goods that subjected to VAT in Indonesia?

Digital goods has been defined in PMK-48/2020. All digital taxable goods is taxable goods under VAT Law.
For example (but not limited to): e-Books, e-magazines, e-comics; computer software, digital applications, digital games; multimedia, elektronic data.

What will be the criterion for overseas merchants to be appointed as VAT collector?

The threshold of the criteria, either of total sales or traffic or user will be determined in the DGT regulation that is still in process and will be released as soon as possible (around June 2020).

in condition that we as a company engage with off shore company providing games, they the one who provide the games but through our apps/web. who is going to deduct the VAT?

When the apps/web operator has been appointed as the VAT Collector, that apps/web operator must collect VAT instead of games developer (seller).

Any specific requirement for the VAT collection evidence as we understand that VAT payment can be claimed as input VAT for Indonesian buyers?

For B2B transactions, business (consumer) can claim input VAT. In order to do so, business (consumer) need to inform the seller (the VAT Collector) about its name and Tax Identification Number/TIN (in Indonesia, it is called NPWP) to be recorded in the invoice.

and who shall report, should the offshore company or the ID company?

The offshore company appointed as the VAT Collector must submit quarterly report.
Beside of that, Indonesia businesses as buyer who is also taxable person for VAT need to submit VAT return in order to claim input VAT.

The circumstances that may be considered by the tax officials to request for a full one calendar year report to the appointed VAT collector?

A yearly report, based on DGT request, is needed, for example (but not limited), to check the validity of VAT credited as Input Tax by your consumer.  So, more detail data is needed. However, we are sure that, the detail data is existed in your system. So, you just only copy or transferred in the table (format will be decided later), and reported the data to DGT via online application provided or determined by DGT’s system.

What if the seller does not have any office rep in Indonesia do they still obligae to collect the VAT?

The foregin seller appointed as the VAT Collector does not need to have representative in Indonesia in order to do VAT collection.

The presentation said that the sellers have the obligation to file a quarter VAT report. How does it work for the transaction made through an e-commerce platform? is it still the sellers' obligation to do so or this might also become e-commerce providers' obligation?

E-commerce platform appointed as the VAT Collector must collect, remit, and report VAT collection for any transaction made through its platform.
If there is any seller who is also appointed as the VAT Collector makes transactions both directly and through e-commerce platform (the VAT Collector), thus, seller only collect, remit, and report VAT only for transactions made directly to the Indonesian consumers.

(i) what is the potential sanctions for the overseas sellers if they fail to inform DGT to be appointed as VAT collector? (ii) how about sanctions if they late in collecting the VAT payment or late in submitting the VAT return? Will they be subject to sanctions under Indonesian Tax Law? Thank you

PMK-48 does not regulate any sanctions.
Sanctions and penalties will be regulated in a specific Minister of Finance Regulation that will be stipulated later, as an implementation of Law Number 2 of 2020.

If the foreign VAT collector selling to Indonesian customers also incurs costs on service or supplies (related to their delivery of taxable goods and services in Indonesia) and pay Indonesian VAT, may they claim input VAT credits?

Foreign business appointed as the VAT Collector is not able to claim input VAT related to transaction to Indonesian customer.

For B2B online advertising transactions, where a foreign service provider did not exceed the threshold, should the foreign service provider still charge Indonesian VAT and explicitly display the VAT charged on invoice issued to Indonesian advertisers? 

DGT will only appoint businesses who meets criteria to be the VAT Collector. Indonesian business (consumer) who purchase services from foreign business who has not been appointed as the VAT Collector, must pay VAT by themself.

Does an overseas digital economy provider has to establish a BUT in Indonesia to be able to report quarterly VAT report?

Foreign business appointed as the VAT Collector does not need to establish PE (BUT) in Indonesia.

Is the VAT tax point date in the new rules only based on when the overseas supplier receives payment from Indonesian customers after being appointed as VAT collector (regardless of the invoice date, or service period relating to payment)? In one of the examples given in the VAT presentation, if an appointment is made on 15 July, the taxpayer is required to be registered and charging VAT by 1 August. This is not enough time for taxpayers to

a) change their finance/billing systems

b) inform customers of changes and

c) complete registration for VAT.

After the date of decree of appointment, the effective date will be the 1st date of next month. So, for transactions made since the enactment of the decree, VAT must be collected. Proof of VAT collection must be made at the time of payment by the Indonesian customer.
For your convenience, DGT will implement a policy that the decree will be issued at the beginning of the month and DGT may try to make pre-communication with you prior to the release of the decree. So, you are also expected to have enough time to change the system, and notify customers if necessary.

Can the DGT give more time for companies to be ready? Companies should have at least 2 months from the date of appointment to set up their systems  inform customers &  register/start collecting VAT

In our consideration, the time is enough for taxpayer to prepare the process.  After the date of decree of appointment, the effective date will be the 1st date of next month. For example, if the date of decree of appointment is 3 July 2020, your obligation of VAT collection will be started from 1 August 2020, and the first payment of the VAT collected is no later than 30 September 2020.
For your convenience, DGT will implement a policy that the decree will be issued at the beginning of the month and DGT may try to make pre-communication with you prior to the release of the decree. So, we hope that your system is ready when the obligation is effectively started.

For B to B if the PMSE collected the VAT how will the Indonesian business buying the intangible good/service from offshore claim the input VAT?

For B2B transactions, business (consumer) can claim input VAT. In order to do so, business (consumer) need to inform the seller (the VAT Collector) about its name and Tax Identification Number/TIN (in Indonesia, it is called NPWP) to be recorded in the invoice.

for sales to B2B, such customer are accounting for VAT under reverse charge mechanism. under the new rule, does it mean they no longer have to withhold VAT?

Yes, if the seller has been appointed as the VAT Collector, Indonesian customer is no longer to pay VAT by itself under reverse charge mechanism.

VAT registration

Registration process will be as simple as possible via online application provided o determined by DGT’s system.

Does the Minister of Finance intend to send out appointment letter on or after 1 July 2020?  Or will that be done before 1 July 2020?

Since PMK-48/2020 will be in effective on 1 July 2020, the appointment letter will be issued on and after 1 July 2020

If a foreign supplier delivers taxable goods or services directly, and also delivers them through a local or foreign marketplace that is also a VAT Collector, which party is responsible

When the local or foreign marketplace has been appointed as the VAT Collector, that local or foreign marketplace must collect VAT instead of foreign supplier.
If the foreign supllier who is also appointed as the VAT Collector makes transactions both directly and through local or foreign marketplace (the VAT Collector), thus, the foreign supplier  only collect, remit, and report VAT only for transactions made directly to the Indonesian consumers.

According to PMK 48/2020  tax officials may require the appointed VAT collector to submit a full report for one calendar year. Could you please elaborate the circumstances that may be considered by the official to request such report? 

A yearly report, based on DGT request, is needed, for example (but not limited), to check the validity of VAT credited as input VAT by your consumer.  So, more detail data is needed. However, we are sure that, the detail data is existed in your system, so, you just only copy or transferred in the table (format will be decided later), and reported the data to DGT via online application provided or determined by DGT’s system.

For companies which wish to be appointed as VAT collector, when can they start to inform DGT?  How can the notification be done?

Companies that have met the criteria can notify the DGT. Notification can be delivered immediately after 1 Juli 2020. Based on this notification, the DGT will consider issuing the DGT decree regarding the appointment of the VAT Collector.

Understand that there's a minimum requirement for quarterly VAT Returns. Does an overseas digital economy provider just follow this minimum requirement or is there any specific format? And how to submit the quarterly VAT Returns? Any DGT Portal that can be used? Should there be any registration on this?

The VAT Collector submits the report of VAT collection through DGT Portal. There will be specific format that contains minimum requirement as regulated in PMK-48/2020.
To be able to use the DGT's system, you must first activate your account via that DGT's system.

Clarification on whether B2B (such as intercompany transactions) is included as PMSE subject to VAT, because the indonesian user has paid the self asessed VAT and hence there is double imposition of VAT

If foreign provider has been appointed as the VAT Collector, then that foreign company collect VAT instead of the customer. In case the customer had already paid the VAT by themself (self assessment), then there will be procedures to claim the VAT in order to avoid double VAT collection.

Will MOF be providing information to companies on the basis which a company is identified for VAT collection, and what is the opportunity for discussion about whether the appointment is appropriate. E.g. payment transactions may be done through a reseller and the VAT is more appropriately collected by such a reseller. How can such clarifications be made with MOF, and is there a grace period before the obligations begin to allow these details to be sorted out?

In our consideration, the time is enough for companies to prepare the process.  After the date of decree of appointment, the effective date will be the 1st date of next month. For example, if the date of decree of appointment is 3 July 2020, your obligation of VAT collection will be started from 1 August 2020, and the first payment of the VAT collected is no later than 30 September 2020.
For your convenience, DGT may try to make pre-communication with you prior to the release of the decree. So, we hope that your system is ready when the obligation is effectively started.

What is the registration threshold? does VAT collector need to appoint a local VAT agent?
How much is the minimum transaction value per yr or traffic number  for the provider of PMSE to be in scope of this PMK 48 ?

The threshold of the criteria, either of total sales or traffic or user will be determined in the DG regulation that is still in process and will be released as soon as possible (around June 2020).
The overseas VAT Collectors can appoint representatives in Indonesia to fulfill their VAT collection obligations.

1. How much is the minimum transaction value per yr or traffic number  for the provider of PMSE to be in scope of this PMK 48 ?
2. Based on the PMK 48 art 5,  the appointment as  VAT collector will be appointed by Director General of Tax,  is it done via letter / email to the provider of  PMSE ?
3. VAT collector on PMSE will be given identity number for tax administrative purposes,  how many digit will be the number ?
4. Has the guidance for document can be treated as Faktur pajak been issued for this PMK 48  ?
5. Any additional period  given to  provider of PMSE  that is appointed as vat collector on PMSE if the system is not ready ?
6. DGoT can request a yearly report on VAT collected on PMSE,  is it additional report to Quarterly report or if already report based on yearly basis then no need to provide quarterly report ?"  is it additional report to Quarterly report or if already report based on yearly basis then no need to provide quarterly report ?"

1. The treshold of the criteria, either of total sales or traffic or user will be determined in the DGT regulation that is still in process and will be released as soon as possible.
2. DGT will issue the decree concerning the appointment of the VAT Collector. This decree will be the basis for Tax Office to issue the certificate of registration as the VAT Collector (in Indonesia, it is called “Surat Keterangan Terdaftar”) created by DGT’s system, and will be sent to you via email. In the certificate of registration, also includes identity number as the VAT Collector and may be E-FIN that can be used to activate your account in the DGT’s system in order to fullfill the obligation related to the PMK-48 such as payment process and reporting of VAT collected.
3. The digits are identical with the digit of Taxpayer ID (NPWP), which is 15 digits.
4. Your daily commercial invoices, billings, order receipts, or other similar documents might be used as proof of VAT collection as long as  those commercial invoices, billings, order receipts, or other similar documents state the VAT charged and collected. However, in the case of B2B, in which, your customer needs the invoice as the proof of VAT payment in order to credited as input VAT, you must state the “registered” name and the Taxpayer ID of your customer. As additional explanation, for your easiness, you are not obliged to change your accounting system to accomodate the “registered” name and the Taxpayer ID of your customer. You can include both items in the identity of your customer using slash. For example, the name customer: Abadi (name in your sytem)/PT ABADI NUSAKARYA (regstered name)/xx.xxx.xxx.xx-xxx.xxx (Taxpayer ID). But, if you are intended to change your system to accomodate these two items, it will be better.
5. In our consideration, the time is enough for taxpayer to prepare the process.  After the date of decree of appointment, the effective date will be the 1st date of next month. For example, if the date of decree of appointment is 3 July 2020,  your obligation of VAT collection will be started for 1 August 2020, and the first payment of the VAT collected is no longer than 30  September 2020. For your convenience, DGT may try to make pre-communication with you before release the decree concerning your appointment as the VAT Collector. So, we hope that your system is ready when the obligation is effectively started. As suggestion, from now, if your system has not acomodate or include VAT charge, please, change it to enable the obligation of VAT collection.
6. PMK-48 obliges the reporting quartely, but it only aggregate monthly data of amount of cunsomer, total monthly sales, monthly VAT collected, and monthly VAT paid for each quarter (the example and format will be presented in the DGT regulation that will be realesed as soon as possible). A yearly report, based on DGT request, is needed , for example (but not limited), to check the validity of VAT credited as input VAT by your consumer.  So more detil data is needed. However, we are sure that, the detail data is existed in your system. So, you just only copy or transferred in the table (format will be decided later), and reported the data to DGT via online application provided o determined by DGT’s system.

Is telecommunication services in scope?

Telecommunication services is included as taxable services. If the transactions therefore, it becomes the subject to VAT at a rate of 10%.
If the utilization of these services from outside the customs area within customs area is done via trading through electronic system, VAT is collected by the VAT Collector under the regulation of PMK-48/2020. Otherwise, the consumers shall collect and pay the VAT by themselves under the regulation of Article 3A VAT Law.
In the case that your company is a telecommunications company and is involved in transactions between the seller and the buyer in terms of providing telecommunications networks only and is not involved in the payment aspect of the transaction between the seller and the buyer, your company will not be appointed as a VAT Collector.

As a Multinational Company, most of our systems vendors/solutions that are contracted by our Headquarters under a master agreement. Our Indonesia based company only uses the tools integrated under our global system. Is our local company exempted from VAT?

If  those tools integrated under your global system is related to object in PMK-48/2020, it is not exempted from VAT.

For USD VAT reporting is any approval required or is this for the tax office to choose?

The VAT Collector itself will decide whether to pay and report VAT collection using USD or Rupiah currency.
The VAT collectors do not need to get DGT approval to make remit or report in USD.

1. In PERPU-1, there is a provision that the appointed PMSE VAT-collector could appoint representative in Indonesia to perform the VAT-collector obligations. However, PMK-48 does not mention anything about representative appointment. Would the provisions about the representative appointment will be further regulated in the incoming DGT Regulations?
2. In relation to the VAT-collector appointment by the DGT, will there be any communication from the DGT to the foreign seller/provider/PPMSE before the appointment? Will this be regulated further in the incoming DGT Regulation?
3. Will there be any procedures/mechanism for the DGT to monitor the fulfillment of the obligations by the appointed PMSE VAT-collector?

1. Representives will be regulated in another Ministry of Finance Regulation.
2. DGT may try to make pre-communication with business before release the decree of appointment. So, hopefully that its system is ready when the obligation is effectively started.
3. DGT has been developing monitoring mechanism for VAT Collector.

Since the VAT collectors are named by the Director General, is the qualifications only those companies that meet the threshold, or can DGT ask a company to be a collector that is below the threshold?

DGT will only appoint businesses who meets criteria to be the VAT Collector.

On B2B transactions,  if this VAT regulation has already applied,  whether local customer should still pay the VAT Offshore for every purchase of goods / service from offshore companies which already appointed by DGT as VAT collector?

If offshore provider has been appointed as the VAT Collector, then that offshore company collect VAT from local customer.  Local customer does need to pay VAT to government by themself.
In case local customer had already paid the VAT by themsel (self assessment), then there will be procedures to claim the VAT in order to avoid double VAT collection.

When does DGT intend to issue the regulations on registration threshold / traffic or access?  Will that be in June?

The threshold of the criteria, either of total sales or traffic or user will be determined in the DG regulation that is still in process and will be released as soon as possible (around June 2020).

1. What would be the exact amount of transaction value and/ or number of traffic or users that will become the threshold for an e-commerce player to be appointed VAT collector? Also,  what does “traffic” and “user” mean? Are these limited to active user and/ or traffic that generates sales?
2. For classified ads meeting the specific criteria,  will they also be appointed as VAT collector even though they don’t facilitate transactions between sellers and buyers on-platform?
3. What kind of identity number that will be given to VAT collector? Will it be or related to taxpayer ID? If so, will it be then used as an identity for future income tax or electronic transaction tax (ETT),  as well?

1. “Traffic” or “user” is relate to number of visitors who visit your website. Traffic and user are not limited to activities that generate sales. The amount of sales has been representated in the first criteria as “total sales.” The treshold of the criteria, either of total sales or traffic or user will be determined in the DGT regulation that is still in process and will be released as soon as possible.
2. Classified ads include taxable services which are subject to PMK-48/2020. So, classified ads service providers can also be appointed as the VAT Collector if they meet the criteria.
3. Identity number will be unique for the VAT collector. However, it may relate closely to Taxpayer ID, and it may be used as an identity for future income tax or ETT.

When will MOF issue appointment letter?

First batch, appointment letter will be issued after 1 July 2020.

Currently we have paid the VAT Self Assess, will it double with VAT impose from foreign enterprise/Facebook? How the mechanisme to avoid the double VAT?

If foreign provider (i.e. Facebook) has been appointed as VAT Collector, then that foreign company collect VAT from you, and you don't need to pay VAT yourself.
In case your company had already paid the VAT by yourself (self assessment), then there will be procedures to claim the VAT in order to avoid double VAT collection. 

If the seller who met the requirements but not appointed yet and doing the selling, the query is

• an implication to the buyer ?
• who should initiate the process to inform the DGT the seller to be appointed ?
• what is the consequence also to seller?

• the buyer itself needs to pay VAT based on Article 3A VAT Law.
• The seller might inform DGT to be appointed as the VAT Colletor by sending notification letter.
• There is no consequences to Seller if they are not appointed as VAT Collector.

What if an Indonesia customer download an update of games or application, will this update be subject to VAT? I believe the first purchase of games or application has been imposed VAT. Thank you

According to PMK-48/2020, VAT is imposed on the base of payment. When there is no payment made by users when updating games or application, hence, there is no VAT collected on that transaction.

intra group recharges for software packages could these trigger a VAT registration requirement?

Yes, as long as object of transactions is subject to VAT based on PMK-48/2020, the foreign seller/provider might be appointed as the VAT Collector.

Does it mean that the VAT will only be applied for premium users that pay monthly membership fee? For example,  if I'm using free non-membership Spotify,  then Spotify cannot collect the VAT from me.

According to PMK-48/2020, VAT is imposed on the base of payment. When there is no payment made by users, hence, there is no VAT collected on that transaction.

Prior to 1 July 2020 (VAT on inbound digital supplies), Indonesia VAT registered vendor supply digital products to non-Indonesia business which in turn sell to Indonesia consumers. The Indonesia VAT registered vendor has been zero-rating the supplies. Can this zero-rating treatment continue on and after 1 July 2020 when the non-Indonesia business become appointed as the VAT collector?

PMK-48/2020 covers inbound digital supplies only. Outbond digital supplies is regulated under PMK-32/2019.
The taxation treatment of export of taxable services will continue to apply in accordance with PMK 32/2019. The appointment of non-Indonesia businesses as the VAT Collector in accordance with PMK-48/2020 will not affect the zero-rate VAT on supplies of Indonesian businesses to non-Indonesian businesses.

Our business model is through the partners and distributors and we do not do the direct selling to the customers. So, if our partners are VAT collectors and have already paid the VAT collected to the government, we as the principal does not to be the VAT collector and there is no changes to the current recording, invoicing and VAT payment, correct?

Process businesses will be carefully assessed by DGT to make VAT collection being more effective and efficient both for DGT and businesses. In case businesses make all sales through distributor who has been appointed as the VAT Collector, then business would not be required to collect and remit VAT.

collection for B2C customers.

PMK-48/2020 is subject to both B2B and B2C transactions.

Given the massive number of offshore digital goods and service providers, can the panelist please elaborate how DGT would monitor the compliance for this VAT regulation? There might be a situation where the offshore providers may not aware of this VAT regulation hence not imposing VAT in accordance with the new VAT regulation - is there any penalty for non-compliance?

PMK-48/2020 does not regulate any sanctions.
Sanctions and penalties will be regulated in a specific Minister of Finance Regulation that will be stipulated later, as an implementation of Law Number 2 of 2020.

When will the implemeting regulation be issued?

As soon as possible in June 2020.

If we purchase yearly service license from abroad companies and they haven't had branch in Indonesia, should we pay VAT to Indonesia government?

The question is not clear whether "we" is the business located in Indonesia or not since the asker is "anonymous".
Suppose, the subject is Indonesian business who purchase yearly service license from abroad. If the foreign provider has been appointed as the VAT Collector, thus, the foreign provider must collect and remit VAT to Indonesia Government. Otherwise, if the foreign provider has not been appointed as the VAT Collector, then the Indonesian business must pay VAT to Indonesia Government by itself.

Companies will be notified that they will need to collected VAT. Will MOF be providing information to companies on the basis which a company is identified for VAT collection, and what is the opportunity for discussion about whether the appointment is appropriate. E.g. payment transactions may be done through a reseller and the VAT is more appropriately collected by such a reseller. How can such clarifications be made with MOF, and is there a grace period before the obligations begin to allow these details to be sorted out?

In our consideration, the time is enough for companies to prepare the process.  After the date of decree of appointment, the effective date will be the 1st date of next month. For example, if the date of decree of appointment is 3 July 2020, your obligation of VAT collection will be started from 1 August 2020, and the first payment of the VAT collected is no later than 30 September 2020.
For your convenience, DGT may try to make pre-communication with you prior to the release of the decree. So, we hope that your system is ready when the obligation is effectively started.

Related to the appontment, would there be a process prior to the appointment (sort of a notification) and thereforre there is a chance to have discussion about the vat implications to the company

For your convenience, DGT may try to make pre-communication with you prior to the release of the decree. So, we hope that your system is ready when the obligation is effectively started.

Regarding tax invoice issued by foreign seller,  whether the tax invoice will be issued with standard tax invoice like should be there are tax invoice number,  name of customer,  tax id number, and etc?
 

Tax invoice related to PMK-48/2020 as a proof of VAT collection is the document that created based on “standard” accounting system. The most important thing is, this document must state the VAT charged and collected. It may be in the form of commercial invoices, billings, order receipts, or other similar documents.
However, for B2B transactions, business (consumer) can claim input VAT. In order to do so, business (consumer) need to inform the seller (the VAT Collector) about its name and Tax Identification Number/TIN (in Indonesia, it is called NPWP) to be recorded in the invoice.