lsheet ttle hee Tax News Flash - assets.kpmg...Tax News Flash May 2020 Providers of Offshore E-Commerce Transactions Now Subject to 10% VAT The Ministry of Finance has recently issued

Slipsheet title hereShort descriptionTax News FlashMay 2020

Providers of Offshore E-Commerce Transactions Now Subject to 10% VAT

The Ministry of Finance has recently issued Regulation No. 48/PMK.03/2020 (“PMK-48”). PMK-48 is effective 1 July 2020 and stipulates that any transaction related to the utilization of offshore intangible taxable assets and/or taxable services within Indonesia via e-Commerce is subject to 10% VAT. This was previously stipulated in PERPPU No. 1 Year 2020, which was ratified by the House of Representatives on 12 May 2020.

The obligation to collect this VAT from payments made by Indonesian customers lies with the offshore e-Commerce providers. The Indonesian Tax Office (“ITO”) will appoint such offshore e -Commerce providers as VAT collectors.

Items subject to VAT and its collection under PMK-48

Below is the list of offshore intangible taxable assets and taxable services, if obtained via e-Commerce, that are subject to 10% VAT:

a. The use or right to use copyrights in the fields of literature, art or scientific work, patents, designs or models, plans, formulae or secret processes, trademarks, or any form of intellectual/industrial property rights or other similar rights;

b. The use or right to use industrial, commercial or scientific equipment;

c. The use of scientific, technical, industrial or commercial knowledge or information;

d. The use of additional or supplementary assistance in connection with a., b. and c. above, in the form of:

1. the reception or the right to receive images and/or sound recordings, which are distributed to the public through satellite, cable, fiber optics or similar technology;

2. the use or right to use images and/or sound recordings for television or radio, which are broadcasted/transmitted via satellite, cable, fiber optics or similar technology; and

3. the use or right to use part or all of the radio communication spectrum;

e. The use or right to use motion picture films, films or video tapes for television broadcasts or sound tapes for radio broadcasts; and

f. The acquisition of all or part of the rights related to the use or granting of intellectual/industrial property rights or other rights as mentioned above.

The use of intangible taxable assets and/or taxable services also includes the use of digital assets and/or services.

Appointment of VAT collectors

To be appointed as VAT collectors, offshore e-Commerce providers must meet certain criteria to be established by the ITO, which will be based on:

1. A minimum value of transactions with buyers/customers in Indonesia within a 12-month period; and/or

2. A minimum amount of traffic or visitors within a 12-month period.

A buyer/customer is considered to be located in Indonesia if:

• Its residence/domicile is in Indonesia, as indicated by its correspondence/billing address and/or by identification of Indonesia when registering with an e-Commerce provider;

• Payments are made using an Indonesian payment facility; and/or

• Transactions are made from an Indonesian Internet Protocol (“IP”) address and/or an Indonesian telephone number.

If an e-Commerce provider meets the above criteria but has not been appointed as a VAT collector, it may notify the ITO to be appointed. After being appointed as a VAT collector, the e-Commerce provider will be provided a tax identification number (“TIN”) and its VAT obligations will start at the beginning of the following month.

© 2020 KPMG Advisory Indonesia, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG Notes:

• The ITO must issue further regulations on the above requirements to assist offshore e-Commerce providers to determine if they are required to register for VAT purposes in Indonesia.

• It is currently unclear how, when or if offshore e-Commerce providers will be notified regarding PMK-48.

• As the data required to determine the necessity to become a VAT collector (an aggregate value of transactions and number of website visitors from Indonesia–which have not yet been announced by the ITO) is not publicly available, compliance with PMK-48 will initially rely on the cooperation of offshore e-Commerce providers. However, in the long run, the ITO will work with other Government Ministries/Units to obtain this data, including from, but not limited to, financial institutions and credit card providers.

• It may not be realistic for the ITO to expect compliance with PMK-48 by its effective date, as offshore e-Commerce providers must first determine whether it is applicable and, if so, accounting systems will require revisions to their billings, collections and remittance applications, as well as reporting.

• We expect offshore e-Commerce providers will consider changing their business models for the Indonesian market as a result of the 10% VAT and related processing, administrative and reporting requirement costs.

• Making foreign entities directly subject to VAT and appointing off-shore VAT collectors are new concepts in Indonesian taxation which may have further implications in the future.

Payment and reporting obligations

The proof of VAT collection by an offshore e-Commerce provider can be a commercial invoice, billing, order receipt and/or any other documents stating the VAT amount and payment, which will be considered equivalent to a tax invoice by the ITO.

The VAT collected must be transferred to the Indonesian State Treasury monthly by the end of the following month.

The VAT collector must also submit quarterly reports, which are due at the end of the month after each quarterly period. This report must include the monthly total number of buyers/customers and total amounts of payments, VAT collections and VAT transferred. In addition, the ITO may also request annual detailed reports, which would include the names and TINs of the buyers/customers.

The ITO will prepare a separate application or system to facilitate the necessary reporting.



KPMG Advisory Indonesia Tax Services 33rd Floor, Wisma GKBI 28, Jl. Jend. Sudirman Jakarta 10210, Indonesia T: +62 (0) 21 570 4888 F: +62 (0) 21 570 5888

Abraham PierrePartner In Charge, Tax Services [email protected]

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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lsheet ttle hee Tax News Flash - assets.kpmg...Tax News Flash May 2020 Providers of Offshore E-Commerce Transactions Now Subject to 10% VAT The Ministry of Finance has recently issued