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Indonesia to Impose VAT on Digital Goods and Services

Officials in the tax department

New rules to impose value-added tax to online products and services provided by offshore companies will soon be drafted by Indonesian authorities as the country targets revenue from the growing digital market.

Temasek Holdings has estimated Indonesia’s internet economy will have reached US$27billion by last year, and it’s projected to be US$100billion per year by 2025.

John Hutagaol, an official from the tax department, has said that that VAT and in certain cases, sales tax, could be implemented on digital goods and services. “It’s the low hanging fruit and can be applied as per every country’s rules,” said Hutagaol, who serves as the head of the international department at the tax office.

However, he further added that the new rules will take time to be implemented, as the current tax laws only apply to conventional transactions and not digital ones.

Indonesia currently applies a 10 per cent VAT for goods and services. However, businesses with turnover below Rp4.8 billion are exempt from the rule. Hutagaol also suggested that Indonesia could learn from Japan and Australia, who have also imposed digital taxes. He added that the new VAT rules will apply to e-commerce, content providers, start-ups, and internet-based economic activities.

Source: Channel News Asia
Image: The Jakarta Post

See: Indonesia Records 90 per cent Growth in Digital Economy, Highest in ASEAN

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