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Facebook, TikTok among digital companies required to collect VAT in Indonesia
Under Indonesia's new rules, nonresident foreign companies that sell digital products and services in Indonesia valued at least Rp 600 million a year or generate yearly traffic from at least 12,000 users will be required to pay the 10 percent VAT.
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The TikTok logo is seen on smartphones in front of a ByteDance logo in this illustration from Nov. 27, 2019. (REUTERS/Dado Ruvic)
T
he tax office announced on Friday a list of 10 foreign digital companies that will be required to collect a 10 percent value added tax (VAT) from Indonesian consumers starting September after recently imposing such rules on six firms, including Amazon and streaming platform Netflix.
The new companies subject to the tax are United States technology company Apple’s arm Apple Distribution International as well as Amazon’s subsidiaries Amazon.com Services, Alexa Internet, Audible Inc and Audible Ltd.
Social media company Facebook Ireland, Facebook Technologies International and its payment firm Facebook Payment International will also be collecting the tax together with Walt Disney Company Southeast Asia.
The Finance Ministry’s Taxation Directorate General (DJP) also included Chinese short video-sharing platform TikTok on its latest list, bringing the total number of foreign tech companies subject to tax to 16.
“We will continue to identify and actively communicate with other foreign digital companies operating in Indonesia to educate and assess them,” said tax office spokesperson Hestu Yoga Saksama in a statement. “Hopefully, we will add more companies to the tax subject list soon.”
He called on other tech companies that made annual sales of Rp 600 million (US$41,116) to take the initiative and report themselves to the tax office
“VAT collection is part of the government’s effort to create a level playing field for all businesses operating in Indonesia, be it local or foreign companies, conventional or digital companies,” Hestu added.
Under Indonesia's new rules, nonresident foreign companies that sell digital products and services in Indonesia valued at least Rp 600 million a year or generate yearly traffic from at least 12,000 users will be required to pay the 10 percent VAT.
The government, however, cannot collect corporate income tax from the internet giants as the Organization for Economic Cooperation and Development (OECD) has yet to reach a consensus on how to tax tech firms.
The government has been struggling to collect additional revenue to fund its widening budget deficit of 6.34 percent of gross domestic product (GDP) as the COVID-19 pandemic hits business activity.
Starting in August, tech firms Amazon Web Services, Netflix, music streaming service Spotify and Alphabet’s Google for its Google Asia Pacific, Google Ireland, and Google LLC units were required to collect VAT from sales to Indonesian consumers.
