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Indonesia adds 8 more 'VAT collector' tech firms, including Alibaba Cloud, Microsoft

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Jakarta Post - October 12, 2020

Adrian Wail Akhlas, Jakarta – Indonesia has added eight more technology companies to a list of "VAT collectors" – businesses that must charge 10 percent value-added tax (VAT) on all goods and services sold in the country – following the implementation of a digital tax policy earlier this year.

The Finance Ministry's Taxation Directorate General on Friday added Alibaba Cloud (Singapore) Pte. Ltd., Microsoft Corporation, Nexmo Inc. and Microsoft Regional Sales Pte. Ltd. to the list, along with GitHub Inc, UCWeb Singapore Pte Ltd, To The New Singapore Pte. Ltd. and Coda Payments Pte Ltd.

"With these appointments, the companies will start to charge VAT for the products and services they sell to Indonesian consumers on Nov. 1, 2020," the tax office said in a statement.

Since July, the Taxation Directorate General has appointed 36 companies as "VAT collectors" to charge VAT on their goods and services in the country and pay it to the government.

Non-resident digital service providers that generate minimum sales of Rp 600 million (US$40,851) per year or Rp 50 million per month from at least 12,000 users in Indonesia are required to charge VAT under the Law No. 2/2020.

Technology behemoths Google Asia Pacific, Netflix and Facebook are among the "appointed VAT collectors". Meanwhile, LinkedIn Singapore, two subsidiaries of Twitter, Skype Communications, Zoom Video Communications, McAfee Ireland, and Microsoft Ireland Operations started charging 10 percent VAT on Oct. 1.

Governments around the world have been trying to ensure that tech giants pay their fair share of taxes in the countries where they operate, albeit without a physical presence. Indonesia's move to do the same have come amid falling state revenues and an increasing shift to online platforms and remote work during the coronavirus health emergency.

The country collected Rp 1.03 quadrillion in state revenue in August, or 60.8 percent of this year's target, marking a 13.1 percent year-on-year (yoy) decrease from a drop in both tax and non-tax revenue.

Tax revenue, the main income source for the government, fell 15.6 percent yoy to Rp 676.9 trillion due to a sharp fall in corporate tax and import tax amid slowing economic activities.

Indonesia was a huge market for digital products and services, and state revenue was expected to increase gradually as the government appointed more tech firms as "VAT collectors", said Bawono Kristiaji, a research partner at the Danny Darussalam Tax Center (DDTC).

"State revenue will also increase significantly from [collecting] corporate income tax from these digital firms," Kristiaji told The Jakarta Post. He added that the Organization for Economic Cooperation and Development (OECD) was due to release a digital tax "blueprint" for countries soon.

"This would be considered the global consensus and has the potential to benefit Indonesia going forward. Taxing tech firms is one of the best tax policy options to boost state revenue amid the coronavirus pandemic," he said.

Source: https://www.thejakartapost.com/news/2020/10/12/indonesia-adds-8-more-vat-collector-tech-firms-including-alibaba-cloud-microsoft.html

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