Jakarta plans tax overhaul to make tech firms pay VAT

Source:Reuters Published: 2019/9/4 17:58:41

Indonesia is preparing a bill that will make tech firms such as Alphabet Inc's Google and Amazon pay value added tax (VAT), Finance Minister Sri Mulyani Indrawati said.

Such companies will be considered a "permanent establishment" liable for VAT in Indonesia regardless of whether they have a physical office in the country or not, Indrawati said in a statement issued by the Cabinet Secretariat late on Tuesday.

The minister said it was "because they have what is called a significant economic presence, although they don't have a branch here," listing Google, Amazon and Netflix as examples of companies to be affected by the upcoming rules.

The VAT rate in Indonesia is currently 10 percent, imposed on most products and services.

Google had a tax dispute with Jakarta in 2016 over alleged tax evasion, including missing VAT payments on advertising revenues, which it resolved with an undisclosed settlement. 

The Indonesian government has repeatedly said it wanted to make streaming service providers such as Netflix pay their fair share of taxes.

Amazon is not currently active in e-commerce in Indonesia, but operates cloud services.

The bill, which needs parliamentary approval, is part of broader tax reforms in Southeast Asia's largest economy intended to improve revenue collection, increase compliance and attract investment.


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