The awaited the Director General of Taxation (“DGT”) regulation on the value added tax (“VAT”) on imported digital products and services was issued on June 25, 2020. This is the DGT Regulation No. PER-12/PJ/2020 of 2020 dated June 25, 2020 on Certain Defined Criteria of Collectors and Appointment of Collectors, Collection, Payment, and Reporting of Value Added Tax (“VAT”) on the Utilization of Taxable Non-Tangible Products and/or Services from Outside the Custom Area through Electronic System Trading within the Custom Area (the “Regulation”).
The Regulation is contemplated in the Minister of Finance (the “Minister”) Regulation No. 48/PMK.03/2020 of 2020 dated May 5, 2020 on the Procedures to Appoint Collectors, Collection as well as Reporting of VAT on the same products and/or services (the “Minister Regulation”). Please refer to our Newsflash on the Minister Regulation.
The Minister Regulation sets out the general provisions on the imposition of VAT over use of digital products and services from outside Indonesia. The Regulation is the guideline for the VAT imposition that is effective as of July 1, 2020.
We set out below the following salient provisions of the Regulation: (i) criteria of VAT collectors, (ii) procedures of VAT collection, (iii) procedures of VAT payment, and (iv) procedures of VAT reporting.
- Criteria of VAT Collectors
In order to collect the VAT, an Electronic System Trading (Perdagangan Melalui Sistem Elektronik – the “PMSE”) Business Actor must first be appointed by the DGT through the issuance of a DGT Decree (a “PMSE VAT Collector”). The PMSE VAT Collector shall collect the VAT from the consumers starting from the following month after the issuance date of the DGT Decree.
Each PMSE VAT Collector will be given a PMSE VAT Collector Identification for administrative purposes. They will also be obligated to activate an account and verify their data through an application that will be provided by the DGT.
The criteria for a PMSE Business Actor to be appointed as the PMSE VAT Collector are as follows:
- It has a transaction value with Indonesian consumers (i.e., the product purchasers and/or service recipients) in excess of Rp600,000,000 (six hundred million Rupiah) in 1 (one) year or in excess of Rp50,000,000 (fifty million Rupiah) in 1 (one) month; and/or
- the volume of the traffic or the number of parties in Indonesia that access the services exceeds 12,000 (twelve thousand) in 1 (one) year or 1,000 (one thousand) in 1 (one) month.
In our view, the thresholds look fairly low and many PMSE Business Actors would likely meet these criteria.
A PMSE Business Actor may request the status as a PMSE VAT Collector from the DGT by submitting a notification to the DGT.
Further, if a PMSE VAT Collector no longer satisfies the abovementioned criteria, then the appointment will be cancelled by the DGT through a DGT Decree.
- Procedures of VAT Collection
The VAT that must be collected by a PMSE VAT Collector is at 10% of the tax basis and must be collected during the payment made by the consumers. In order to accommodate all types of transaction, the Regulation sets out 3 (three) different flows of VAT collection, as follows:
- When the transaction is carried out directly by the seller who is also a PMSE VAT Collector to the consumers, the payable VAT over the use of intangible taxable goods and/or services must be collected, paid, and reported by the seller;
- When the transaction is carried out by the seller to the consumer, through a PMSE Operator, the payable VAT over the use of intangible taxable goods and/or services must be collected, paid, and reported by either the seller or the PMSE Operator who (i) is appointed as the PMSE VAT Collector and (ii) issued the commercial invoice, billing, order receipt, or any other similar documentation; and
- In the case that the use of intangible taxable goods and/or services within the custom area through a PMSE from outside of the custom area is not being collected with VAT as referred to in points (a) and (b) above, then the payable VAT over the use of intangible taxable goods and/or services must be collected, paid, and reported personally by the consumers by no later than the 15th of the following month after the VAT becomes payable. In this case, the VAT becomes payable (i) when the intangible taxable goods and/or services is used by the consumers, (ii) when the cost of such intangible taxable goods and/or services is deemed payable by the consumers, (iii) when the selling price of such intangible goods and/or replacement of such taxable services is collected by the party who provides it, or (iv) when the cost of such intangible taxable goods and/or services is paid partly or entirely by the consumer, whichever occurs first.
On the other hand, if the VAT is collected both by the PMSE VAT Collector as referred to in points (a) and (b) and by the consumers as referred to in point (c) above, then in accordance with Article 3A of the Indonesian VAT Law, the VAT that is personally paid by the consumers may be (i) transferred to pay for certain other tax payment, (ii) refunded as an overpaid payment, (iii) credited to the output tax, or (iv) deducted from the gross income—all of such are subject to the relevant laws and regulations on taxation.
Over the collected VAT, the PMSE VAT Collector must issue a proof of VAT collection in the forms of commercial invoices, billings, order receipts, or any other similar documentation, which state that the VAT collection is done and paid. In order to be treated the same as a tax invoice, such proof of VAT collection must consist of the name and the Tax Registration Numbers (NPWP) of the consumers or the email addresses of the consumers registered under the DGT administration.
- Procedures of VAT Payment and Reporting
A PMSE VAT Collector must pay the collected VAT for each tax period by no later than the end of the following month after the end of a tax period. The VAT payment shall be conducted electronically by using the DGT billing code, which is obtained by the PMSE VAT Collector through the DGT billing application.
The PMSE VAT Collector may choose his/her preferred money currency on the DGT application and if the PMSE VAT Collector chose to pay the VAT in US Dollar, then the payment shall be made to the state’s treasury through a perception bank of foreign currency or other perception institution.
Further, the PMSE VAT Collector must report the collected and paid VAT quarterly by no later than the end of the following month after the end of a quarterly period, as follows:
- Q1: Tax period of January until March;
- Q2: Tax period of April until June;
- Q3: Tax period of July until September; and
- Q4: Tax period of October until December.