Indonesia Revamps VAT System for Cross-Border Digital Services: Key Changes and Compliance Guide

• Indonesia has updated its VAT system for cross-border digital transactions, impacting foreign investors and digital service providers.
• The new system introduces a centralized collection mechanism to capture overseas digital activities within the Indonesian tax framework.
• The Tax Collection System on Cross-Border Digital Transactions, SPP-TDLN, mandates VAT on digital services and electronic information from foreign entities to Indonesian users.
• The system standardizes collection, reporting, and remittance for cross-border digital transactions.
• SPP-TDLN applies to digital services and information delivered electronically, including SaaS, streaming, cloud computing, digital advertising, and downloadable media.
• The VAT rate for digital services is 12 percent, with the VAT base calculated at 11/12 of the gross payment amount.
• Foreign providers must register as VAT collectors if annual transactions exceed 600 million rupiah or serve more than 12,000 users.
• Registration is through the Directorate General of Taxes’ online system, requiring a local representative for compliance.
• Providers must integrate invoicing and payment systems with the tax authority’s reporting platform.
• Example: A SaaS provider earning 700 million rupiah from Indonesian customers must register, obtain a tax ID, and appoint a local representative.
• Dezan Shira & Associates offers support for navigating Indonesia’s digital VAT rules.

Source: aseanbriefing.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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