Indonesia announces digital tax on major players

Indonesia announces digital tax on major players

Following May’s announcement of plans for a 10 percent value-added tax (VAT) on the sale of digital products and services from 1 July 2020, there’s been further tax-related news from Indonesia.

Reuters reports that a 10 percent VAT is to be imposed on sales by a number of technology firms including major players such as Amazon, Netflix, Spotify and Google.

This appears to be, at least in part, a reaction to changing spending patterns resulting from increased remote working of late. This in turn, can be blamed on the ongoing pandemic: there’s been a fall in business activity and a multi-billion dollar government outlay on dealing with Covid-19.

The result has been something of a hit on state finances, but the ongoing boom in the digital economy may help to plug the gap.

The May announcement mentioned digital products sold by non-domiciled internet companies “with a significant presence in the Indonesian market, including streaming services, applications and digital games”.

Under the new rules, non-resident foreign firms which sell digital products and services in Indonesia worth at least 600 million rupiah (about $41,667) a year – or which generate yearly traffic from at least 12,000 users – will be required to pay the new VAT rates.

A government spokesperson suggested that the number of companies selling digital products that will be required to pay the VAT is likely to increase.

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