Imposition of VAT on Utilization of Intangible Goods and/or Taxable Services from Outside Customs Territory within Indonesia through Electronic Systems becomes effective from 1 July 2020
- June 5, 2020
- Posted by: Administrator
- Category: Tax News
The utilization of intangible goods and/or services from outside the Customs Territory within Indonesian (“digital intangible goods / services”) through electronic systems (Perdagangan Melalui Sistem Elektronik – “PMSE”) has significantly increased. The prevailing VAT regulations do not stipulate a mechanism to impose VAT on utilization of digital intangible goods / services through PMSE. To provide fairness of the VAT treatment for digital and non-digital intangible goods / services, the Ministry of Finance has issued regulation no. 48/PMK.03/2020 dated 5 May 2020 concerning the procedures for appointment of collectors, collection, and payment, as well as reporting of VAT on utilization of intangible goods and/or taxable services from outside the Customs Territory within Indonesia through electronic systems (“PMK-48”). PMK-48 becomes effective from 1 July 2020.
The summary of PMK-48 is as follows:
Objects of Offshore VAT
- VAT shall be imposed on utilization of intangible goods and/or services from outside the Customs Territory within Indonesia through PMSE.
- Utilization of intangible goods/ taxable services in this context includes utilization of digital goods (e.g. movie, music, computer software, mobile app, games, electronic book, magazine, comic, etc.) and digital services (e.g. web hosting, video conferencing services, etc. ( “digital intangible goods / services”).
PMSE VAT Collection
- The VAT on utilization of digital intangible goods / services through PMSE (“PMSE Offshore VAT”) shall be collected, paid and filed by the appointed individual or entity conducting business through PMSE (“PMSE VAT collector”).
- The PMSE offshore VAT payable on direct transactions between an overseas seller or service provider and a buyer and/or service user shall be collected, paid and filed by the said seller and/or service provider that is appointed as a PMSE VAT collector.
- In the event that the overseas seller/ service provider conducts transactions through an offshore or domestic PMSE operator (“PPMSE”), the PMSE offshore VAT can be collected, paid and reported by an offshore seller, service provider, or offshore or domestic PPMSE that is appointed as a PMSE VAT collector.
- The PMSE offshore VAT payable other than those collected by the appointed PMSE VAT collector shall be collected, paid and reported by the buyer / servicer user through self-assessment mechanism (self-assessed PMSE offshore VAT).
PMSE VAT Collector
- The PMSE VAT Collector is appointed by the Minister of Finance and delegated to the Director General of Tax (“DGT”). However, if the PMSE business (individual or entity conducting business through PMSE) has met the criteria as PMSE VAT Collector but has not been officially appointed as a PMSE VAT collector by the DGT, the PMSE business may submit a notification to the DGT to be appointed as a PMSE VAT Collector.
- To be appointed as a PMSE VAT Collector, the individual or entity should meet the following criteria:
- The value of transactions with Indonesian buyers / service users exceeds a certain amount within 12 (twelve) months; and/or
- The amount of traffic or access has exceeded a certain figure within 12 (twelve) months
The transaction value and amount of traffic or access (threshold) shall be stipulated by the DGT.
Transactions Buyer/Service User
- Residing or Domiciled in Indonesia
- Making payments using debit, credit and/or other payment facilities provided by Indonesian financial institutions; and/or
- Transactions using internet protocol (IP) addresses in Indonesia or using telephone numbers with Indonesian country code.
- The PMSE offshore VAT is payable at the payment date by the buyer / service user. The payment due date of PMSE Offshore VAT is at the end of following month after the VAT becomes payable.
- The PMSE VAT Collector is required to issue VAT collection evidence, which could be in the form of commercial invoice, billing, order, receipt or other document that states the collection and payment of VAT. Such VAT collection evidence is treated as equivalent to a VAT invoice.
- The PMSE VAT Collector is required to report the VAT collected quarterly, no later than the end of the following month after the end of the quarter period (31 January, 30 April, 31 July and 31 October).