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Indonesia: Internet companies need to pay VAT since July, mainly overseas enterprises

June 13, 2020

Indonesia is the most populous country in Southeast Asia and a big market for mobile Internet. Indonesian tax officials announced in May 2020 that Indonesia will require large Internet companies to pay VAT on the sale of digital products and services from July.

According to a regulation published on the website of the Ministry of finance, from July 1, the government will impose a 10% value-added tax on digital products sold by non domestic Internet companies, including online video, applications and online games.

It is reported that Internet companies from overseas play an important role in the Indonesian market. The Indonesian government has previously said that spotify, an online music website providing services around the world, and Netflix, a video website, will be subject to new taxes on their services. Neither company responded to requests for comment. In addition, Google, which sells its products through the software store, is also within the scope of the levy. However, apart from spotify and Netflix, the Indonesian government has yet to provide a list of overseas Internet companies that need to pay VAT.

Indonesia currently imposes a 10% VAT on the sale of most products and services. The country has been working for years to get Internet companies to pay a fair share of taxes, and the decision to impose value-added tax was first announced in March, when President Joko Widodo outlined emergency measures to help the country survive the new crown crisis. Sri muyani indowa, Indonesia’s finance minister, said the purpose of VAT on Internet goods was to ensure that the government was able to respond in a timely manner to changes in the consumption patterns of people staying at home during the outbreak.

According to Google, Temasek Holdings and Bain, Indonesia’s Internet economy is the largest and fastest growing in Southeast Asia, and is expected to reach 130 billion US dollars (S $185 billion) by 2025.

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