Overview of MoF Regulation 48
Under MoF Regulation 48, VAT is imposed on utilization of Taxable Intangible Goods and Taxable Services from outside of the Customs Area in the Customs Area through Electronic Systems ("PMSE"). The VAT must be collected, paid and reported by foreign sellers, foreign service providers, foreign PPMSE or Indonesian PPMSE ("PMSE Business") that are appointed as VAT collectors.
The VAT payable is 10% of the value paid by a buyer or service recipient, excluding the VAT. The VAT must be collected at the time a payment is made by the buyer or service recipient. The VAT collector must issue a proof of VAT collection, and the VAT must be paid to the State Treasury at the latest at the end of following month.
MoF Regulation 48 was issued on 5 May, and will come into force on 1 July.
What MoF Regulation 48 Actually Says in More Detail
The utilization of Taxable Intangible Goods that is subject to VAT under MoF Regulation 48 includes the following:
- use or right to use IP rights in the field of literacy, art or scientific work, patent, design or model, plan, formula or secret process, trademark, or other IP or industrial rights, or other similar rights
- use or right to use industrial, commercial or scientific equipment
- use of knowledge or information in the field of science, technology, industry or commerce
- use of supplements or additions related to points 1, 2 and 3 above, in the form of:
- receiving or having a right to receive pictures or audio recordings, distributed to the people through satellite, cable, optic fiber or similar technology
- the use or the right to use pictures or audio recordings, distributed to the people through satellite, cable, optic fiber or similar technology
- the use or right to use radio communication spectrum, either wholly or partially
- the use or right to use motion picture films, film or video tape for television broadcasts, or audio tape for radio broadcasts
- the right to other industrial or IP rights
The use of Digital Goods and Digital Services is also subject to VAT. Digital Goods are defined as all intangible goods in the form of electronic or digital information including converted goods, and goods that are originally in electronic form, including but not limited to software, multimedia and electronic data. Digital Services are defined as services provided through the internet or electronic networks that are automatic in nature or only involve minimal involvement of humans, and where it is impossible to confirm the service provided without information technology, including but not limited to services based on software.
VAT Collectors are:
- appointed foreign sellers or foreign service providers of the utilization of Taxable Intangible Goods or Taxable Services for transactions directly between the foreign sellers or foreign service providers and a buyer or service recipient
- appointed foreign sellers, foreign service providers, foreign PPMSE and/or Indonesian PPMSE if the foreign sellers or foreign service providers conduct a transaction with a buyer or service recipient through an offshore PPMSE or Indonesian PPMSE on the utilization of Taxable Intangible Goods or Taxable Services
A PMSE Business is appointed as a VAT Collector if it meets certain criteria. The criteria set out in MoF Regulation 48 are in terms of:
- transaction volume in Indonesia over a 12-month period
- total traffic over a 12-month period that exceeds certain level.
The Director General of Tax will set out the details of the criteria. In addition, the authority to appoint VAT Collectors is also held by the Director General of Tax. The appointment of a VAT Collector will come into force in the early of the following month after the stipulation of the appointment.
The Director General of Tax will give a VAT Collector an identity number to be used in fulfilling its tax rights and obligations. If a PMSE Business meets the criteria of a VAT Collector, but it has not been appointed yet, it can notify the Director General of Tax to be appointed as a VAT Collector.
For transactions of the utilization of Intangible Taxable Goods and Taxable Services that does not fall into provisions of MoF Regulation 48, the VAT must be collected, paid and reported by the buyer or the service recipient.
Buyer or Service Recipient
Buyers and service recipients are defined as individuals or entities that meet one of the following criteria:
- domiciled in Indonesia
- make payment using debit, credit or other payment facilities provided by an institution in Indonesia
- enter into transactions using an internet protocol address in Indonesia, or using a phone number with an Indonesian country code
An individual or entity is considered to have its domicile in Indonesia if the mailing or billing address is in Indonesia, or the country chosen at registration is Indonesia.
A VAT Collector who is a foreign seller, foreign service provider, foreign PPMSE or Indonesian PPMSE must issue proof of VAT collection. The proof can be in the form of commercial invoice, bill, order receipt or similar documents that state that the VAT has been collected and it has been paid. The proof of VAT collection that is treated as a VAT Invoice must be issued in accordance with the requirements set out by the Director General of Tax.
The VAT collected by a VAT Collector that is a foreign seller, foreign service provider, foreign PPMSE or Indonesian PPMSE must be paid at the latest at the end of the following month. The payment is made electronically to the State Treasury, and the payment can be made in rupiah, US dollars or other foreign currency stipulated by the Director General of Tax.
In addition, a VAT Collector is also required to submit a report on the collected and paid VAT. The report must be submitted every three months, and it must contain at least all of the following information for each fiscal period:
- total buyer and service recipient
- total payment
- total VAT collected
- total VAT paid
The report is made in electronic form, and is reported through an application or system provided by the Director General of Tax.
The Director General of Tax can also request a detailed report on the VAT collected by a VAT Collector in one calendar year. The detailed report must contain the following information:
- number and date of proof of VAT collection
- total payment
- total VAT collected
- name and tax ID number of buyer and service recipient, if the tax ID number is stated in the proof of VAT collection.
Actions to Consider
MoF Regulation 48 provides additional details of the VAT obligation set out in Perppu 1/2020, which has been passed as a law by the House of Representatives under Law No. 2 of 2020.
However, MoF Regulation 48 has not stipulated the criteria of a VAT Collector. MoF Regulation 48 also has not provided details on certain provisions under Perppu 1/2020, such as the appointment of an entity in Indonesia to fulfil tax obligations of a foreign VAT Collector. Therefore, taxpayers may still need to wait for further regulations to understand how VAT collection on transactions through electronic systems will be imposed.
Further consultation may be required to fully understand the details of MoF Regulation 48.
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