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Digital Tax for Foreign Companies Coming in July 2020

Netflix, the paid-for entertainment streaming site from the United States.

The Directorate General of Taxation (DJP), part of the Ministry of Finance, began will begin to apply a purchase tax on digital products from abroad from 1st July 2020. The tax will be 10 percent VAT.

The imposition of value-added tax (VAT) on digital products such as Netflix will have an impact on the price paid by the customer. Tax observer at the Centre for Indonesian Taxation Analysis (CITA), Fajry Akbar, said the burden of VAT on this intangible item will fall on consumers.

“The price to be paid by the consumer will increase,” said Fajry. He assesses that the imposition of 10 percent VAT for consumers won’t mean the cost of purchasing intangible products and digital services will increase by more than the tax rate.

“Price increases should correspond to the 10 percent VAT rate. If the 10 percent increase is too high for the consumer, the service provider will have to bear a portion of the tax burden,” he said.

The tax applies to intangible good and services that are being sold to consumers in the country. The VAT collection, deposit, and reporting of the product will be carried out by the business processing the sale through an electronic system, PMSE.

Director of Counseling, Service, and Publicist DJP Hestu Yoga said the businesses using PMSE such as merchants, foreign service providers, foreign PMSE organisers, and domestic PMSE organisers, are appointed by the Minister of Finance through the homeland tax authority.

According to him, the imposition of VAT on the utilisation of digital products from abroad is part of the government’s effort to create a level playing field for all businesses “especially between domestic and overseas actors, as well as between conventional business and digital business,” said Hestu.

The rules of trading through the electronic system are governed by the government regulation of the Substitute Law (PERPPU) Number 1 year 2020, on the state financial policy and financial system stability.

Hestu also said that digital products such as music streaming subscriptions, movie streaming, applications, digital games, and online services from abroad will be treated much like conventional products that are consumed every day and are subject to VAT, as well as similar digital products produced by domestic companies.

Source: Detik

Also Read: Top Bingeable Series on Netflix

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