On 25 June, the Director-General of Tax issued an implementing regulation (“DGT Regulation 12”)  for the VAT collection on digital transaction DGT Regulation 12 provides details of the VAT obligations set out in Perppu 1/2020, which has been passed as a law by the House of Representatives, and MoF Regulation 48
MoF Regulation 48, which provides details on appointment of VAT collectors for electronic transactions, came into force on 1 July 2020. Now that the details of appointments and VAT obligations have been set out in DGT Regulation 12, the Director-General of Tax can start appointing PMSE businesses as VAT collectors.
- Actions to Consider
- Summary of the regulation
Actions to Consider
DGT Regulation 12 does not stipulate in detail how the Director-General of Tax determines whether a PMSE business falls under the criteria of a VAT collector. Therefore, relevant businesses should assess whether they fall under those criteria. If they meet the criteria of a VAT collector, businesses need to prepare to fulfill the VAT obligations set out under Perppu 1/2020, MoF Regulation 48 and DGT Regulation 12. Based on a Director General of Tax press release dated 7 July 2020, six foreign PMSE businesses have been appointed as VAT collectors based on these new regulations and will be obliged to collect VAT on sales to Indonesian customers starting on 1 August 2020.
If a PMSE business is appointed as a VAT collector, as there may be complications in determining transactions that are subject to VAT under MoF Regulation 48, the PMSE business should discuss with the Directorate General of Tax how to determine which transactions are subject to VAT, and reach an agreement.
MoF Regulation 48 and DGT Regulation 12 do not stipulate what penalties can be imposed on a VAT collector for failing to comply with those regulations. However, based on Perppu 1/2020, if a party (including a foreign PMSE) fails to fulfill the tax obligations (including an obligation to collect and pay the VAT), it will result in an administrative penalty as stipulated under Law No. 6 of 1983 as lastly amended by Law No. 16 of 2009 on General Tax Provisions and Procedures. In addition, Perppu 1/2020 also mentioned that after certain warnings, operational access may also be cut off by the Minister of Communications and Informatics based on a request from the Minister of Finance. The government has not yet issued an implementing regulation to set out the details of how the access will be cut off.
Further consultation may be required to fully understand the details of DGT Regulation 12.
Summary of the regulation
As regulated under MoF Regulation 48, DGT Regulation 12 stipulates that VAT is imposed on the utilization of taxable intangible goods and taxable services from outside of the Customs Area in the Customs Area through electronic systems ("PMSE"). The VAT must be collected, paid and reported by foreign sellers, foreign service providers, foreign providers of electronic systems used for trading activities ("PPMSE") or Indonesian PPMSE (collectively called PMSE business) that are appointed as VAT collectors by the Director-General of Tax.
DGT Regulation 12 sets out additional details of the criteria of PMSE businesses that can be appointed as VAT collectors, the procedure to appoint a PMSE Business as a VAT collector, the obligations of a VAT collector and the procedure for revocation of VAT collector status.
DGT Regulation 12 came into force on 1 July.
VAT Collectors Appointment
The Director-General of Tax may appoint a PMSE business as a VAT collector if it meets certain criteria. The appointment is made by issuing a Director General of Tax Decree ("Decree"), which will come into force at the beginning of the month following the issuance of the Decree.
A PMSE business can be appointed as a VAT collector if it meets one of the following criteria:
- Its total transaction value with buyers in Indonesia exceeds IDR 600 million in a year or IDR 50 million in a month.
- Its website traffic or access in Indonesia exceeds 12,000 in a year or 1,000 in a month.
The Director-General of Tax will give a VAT Collector a tax identity number in the form of a Registration Letter/Surat Keterangan Terdaftar to be used as its identity in fulfilling its tax rights and obligations.
An appointed VAT collector must activate its account and update its data online through an application or system designated by the Director-General of Tax, which must be completed before the appointment as a VAT collector becomes effective. A VAT collector that has activated its account can use the Director-General of Tax's application or system to fulfill its tax rights and obligations as a VAT collector.
If there is incorrect information in the Decree, the appointed VAT collector must notify the Director-General of Tax through an email or application or system designated by the Director-General of Tax. Based on the notification, the Director-General of Tax can rectify the Decree and issue an amendment to the Decree. If an amendment is issued, the appointment of the VAT collector based on the initial Decree is still valid.
The Director-General of Tax can revoke the appointment of a PMSE business as a VAT collector if the PMSE business no longer meets the criteria of a VAT collector. The revocation is done through the issuance of a Decree and it comes into effect at the beginning of the following month.
Notwithstanding the above, if a PMSE business meets the criteria of a VAT collector, but it has not been appointed yet, it can notify the Director-General of Tax so that it can be appointed as a VAT collector by using a specific notification form as set out in DGT Regulation 12.
An appointed VAT collector must collect 10% VAT on amounts paid by customers when payments are made. The customer is defined as an individual or entity that utilizes intangible taxable goods and/or taxable services from outside of the Customs Area in the Customs Area through electronic systems, including the buyers of the intangible taxable goods and the service recipients. Further, as stipulated under MoF Regulation 48, the buyers and service recipients that are subject to this VAT imposition are individuals or entities that meet one of the following criteria:
- domiciled in Indonesia
- make payment using debit, credit or other payment facilities provided by an institution in Indonesia
- enter into transactions using an internet protocol address in Indonesia, or using a phone number with an Indonesian country code
An individual or entity is considered to have its domicile in Indonesia if the mailing or billing address is in Indonesia, or the country chosen at registration is Indonesia.
The VAT collector must issue proof of VAT collection, which can be in the form of a commercial invoice, a bill, an order receipt or similar documents that state that the VAT has been collected and the VAT has been paid. The proof of VAT collection is made in accordance with the common business practice of the VAT collector.
If the buyer or service recipient is an Indonesian taxable entrepreneur that is registered for VAT purposes and wishes to claim the input VAT stated in the proof of VAT collection, it should notify its name and tax ID to the VAT collector to be put in the proof of VAT collection.
The proof of VAT collection is treated as a document treated as a VAT invoice that can be treated as creditable input VAT, if it states one of the following pieces of information:
- name and taxpayer ID number of the customer
- email address of the customer that is registered at the Directorate General of Tax administration
If the proof of VAT collection does not contain the information above, the proof of VAT collection can still be treated as a document treated as a VAT invoice, if there is a document attached to it proving that the customer's account in the PMSE business's electronic system contains one of the following pieces of information:
- name and taxpayer ID number of the customer
- email address of the customer that is registered at the Directorate General of Tax
For transactions related to the utilization of intangible taxable goods and taxable services from outside of the Customs Area in the Customs Area through electronic systems that do not fall under the provisions of MoF Regulation 48, the VAT must be collected, paid and reported by the buyer or the service recipient through self-assessment.
If in a transaction, the VAT collector collects VAT from a customer, while the customer also pays VAT through self-assessment, the customer can:
- request the self-assessed VAT to be overbooked to other tax payments
- request the self-assessed VAT to be refunded
- credit the self-assessed VAT as input VAT
- deduct the self-assessed VAT payment from gross income
The VAT collector must remit the VAT collected from the customers to the Indonesian State Treasury at the latest at the end of the following month. The remittance is made electronically through banks or other institutions in Indonesia, or through other means provided by the Director General of Tax. For the remittance process, the VAT collector must generate a billing code from an application or system designated by the Director General of Tax. The remittance can be made in Rupiah, US dollars or other foreign currency stipulated by the Director General of Tax, depending on the currency chosen by the VAT collector in the application.
If there is still VAT that has not been remitted by a VAT collector whose status has been revoked by the Director General of Tax (no longer registered as a VAT collector), the VAT that was collected when it was registered as a VAT collector must still be remitted to the Indonesian State Treasury.
A VAT collector is required to submit a report on the collected and paid VAT. The report must be prepared on a quarterly basis and it must be submitted at the end of the month after the third month of the quarter.
Q1 : Period January to March.
The report must submitted by the end of April.
Q2 : Period April to June.
The report must be submitted by the end of July.
Q3 : Period July to September.
Report must be submitted by the end of October.
Q4 : Period October to December.
The report must be submitted by the end of January.
The report must contain at least the following information for each quarter:
- total number of buyer
- total amount of all payments, excluding VAT
- total VAT collected
- total VAT paid
If no VAT is collected during a quarter, the VAT collector is still required to file a NIL report.
The Director General of Tax can request a detailed report on the VAT collected by a VAT collector for one calendar year. The detailed report must contain the following information:
- number and date of proof of VAT collection
- total payments, excluding VAT
- total VAT collected in each proof of VAT collection
- name and tax ID number of buyer and service recipient, if the proof of VAT collection states the name and tax ID number
- phone number, email address, or other identity of the buyer and service recipient
Both reports are made in electronic forms, and are reported through an application or system designated by the Director General of Tax. The reports can be made in either Indonesian or English language, using the currency chosen by the VAT collector in the Director General of Tax's application or system.