VAT on E-Commerce

The development of digital technology has created an ecosystem for e-commerce which demonstrates cross-border business transactions, including the sale and purchase of Taxable Goods (BKP) and Taxable Services (JKP). Business entities that have been confirmed as Taxable Businessman (PKP) in Indonesia are bound by Value Added Tax (PPN) regulations for the transfer of BKP and/or JKP. The Indonesian Tax Authority responded to the e-commerce ecosystem by issuing several related tax regulations.

The latest tax regulation related to e-commerce is the Regulation of the Minister of Finance of the Republic of Indonesia Number 60 / PMK.03 / 2022 concerning the Procedures for Appointing Collectors, Deposits and Reporting of Value Added Tax on Utilization of Intangible Taxable Goods and/or Taxable Services from Outside the Customs Area in Within the Customs Area through e-commerce. The effective date of PMK No.60/2022 is 01 April 2022, replacing PMK No.48/2020 concerning VAT on e-commerce procedures.

The update in PMK No.60 / 2022 as compared to PMK No.48 / 2020 is the adjustment of the VAT rate on submissions of taxable intangible goods and taxable services through e-commerce into 11% starting April 1, 2022 and will increase increased again to 12% no later than 2025. In addition to the revised rate, the new regulation has also revised the provisions regarding digital companies that have the right to collect, deposit and report VAT on e-commerce.

Previously, only designated companies were entitled to collect VAT on e-commerce, now it is required for business entities that organize e-commerce with a transaction value of Indonesian buyers exceeding IDR 600 million a year or IDR 50 million a month, and/or the volume of traffic/number of users who access in Indonesia exceeds 12 thousand a year or a thousand in a month. Now the companies appointed and/or included must also issue commercial invoices, billings, order receipts or other similar documents.

In general, the provisions regarding VAT on e-commerce collection are relatively the same as the old regulations. Including the criteria for digital companies selling taxable intangible goods or taxable services appointed as collectors of VAT on e-commerce. The criteria in question refers to the transaction value of the purchase of goods or the value of the use of services within 12 months refers to the volume of traffic or access within 12 months. The amount of transaction and traffic restrictions still refers to the regulations of the Director General of Taxes Number 12-PER/PJ/2020.

VAT on e-commerce objects include Utilization of Intangible Taxable Goods including Digital Goods and/or Utilization of JKP, including Digital Services from Outside the Customs Area within the Customs Area through e-commerce. Digital Goods are intangible goods in the form of electronic or digital information including goods that are the result of conversion or goods that are originally in electronic form at least in the form of software, multimedia and/or electronic data. Examples include e-books, e-magazines, computer software and digital applications.

Digital Services are services that are sent via the internet or electronic networks, are automatic (involving little human intervention) and it is impossible to ensure this without information technology, at least in the form of software-based services. Examples include web hosting, video conferencing services, or other software-based services.

Goods Buyer/Service Recipient is an individual or entity that meets the following criteria: residing or domiciled in Indonesia, making payments using debit, credit and/or other payment facilities provided by institutions in Indonesia; and/or make transactions using an internet protocol address in Indonesia or using a telephone number with the Indonesian country code.

Collectors of VAT on e-commerce are required to deposit the collected VAT for each Tax Period no later than the end of the following month, after the Tax Period ends. Collectors VAT on e-commerce may deposit VAT using Rupiah at the exchange rate stipulated by a Ministerial Decree effective on the date of deposit; or United States Dollar currency; or other foreign currency stipulated by the Directorate General of Taxes (DGT).

Collectors of VAT on e-commerce are required to report collected and deposited VAT quarterly for a period of 3 (three) Tax Periods, no later than the end of the following month after the quarterly period ends. The DGT may request the collector of VAT on e-commerce to submit a detailed report on VAT transactions collected for each period of 1 (one) calendar year. The report contains the following information: the number of buyers of goods and/or recipients of services, the amount of payment, the amount of VAT collected, and details of VAT transactions collected for each Tax Period.

VAT on e-commerce can be claimed as Input Tax (Input VAT) by PKP, meaning that Input VAT from these foreign digital products can also be credited. The conditions for e-commerce Input VAT to be credited are that the Proof of Collection must contain the name and NPWP or NIK; or email address registered with DGT. If there is no name and NPWP or email address, then tax payer must provide documents proving that the buyer’s account on e-commerce contains the buyer’s identity (name and NPWP or NIK, or email address registered with the DGT), input VAT can still be credited.