Indonesia to impose VAT on internet companies from July
Indonesia will require big internet companies to pay value-added taxes (VAT) on sales of digital products and services from July as part of efforts to boost revenue amid the coronavirus pandemic, according to a tax official of the country.
HANOI, VNA - Indonesia will require big internet companies to pay value-added taxes (VAT) on sales of digital products and services from July as part of efforts to boost revenue amid the coronavirus pandemic, according to a tax official of the country.
It will impose 10 percent VAT on digital products sold by non-resident internet companies with significant presence in the Indonesian market, including streaming services, applications and digital games, beginning July 1, according to a finance ministry regulation published on the ministry's website.
The government has previously said services by streaming platforms like Spotify and Netflix would be subject to the new tax. Neither company responded to requests for comment.
Products and services bought via Alphabet Inc's Google Play among others would also fall into the category, although the government has not named any companies other than Spotify and Netflix.
Indonesia currently charges a 10 percent value-added tax on sales of most products and services. The country has aimed to get internet companies to pay their fair share of taxes for years and the decision to impose VAT was announced in March when President Joko Widodo outlined emergency measures to help the country weather the coronavirus crisis.
The package was passed by parliament earlier this week.
Indonesia's internet economy is the biggest and fastest growing in Southeast Asia and is expected to reach 130 billion USD by 2025, according to a research by Google, Temasek Holdings and Bain & Company.
Finance Minister Sri Mulyani Indrawati has said that imposing VAT on internet goods was to make sure the government captures the shift in people's consumption patterns as they stay at home during a lockdown to curb the spread of the virus.
The government expects a 10 percent drop in state revenue this year due to the impact of the coronavirus pandemic and weak commodity prices, forecasting that economic growth will more than halve to 2.3 percent, from 5 percent in 2019. It expects a fiscal deficit of 5.07 percent of GDP for 2020, the biggest in more than a decade. - VNA