Indonesia issues new rules to make foreign internet firms pay taxes

Central Park, Jakarta, Indonesia. Photo by Severinus Dewantara on Unsplash

Indonesia has said that overseas companies that have a significant presence in its booming internet economy must appoint a representative in the country and pay all applicable taxes, according to a new regulation made public on Wednesday.

Indonesia’s internet economy is the largest and fastest-growing in the region, on track to cross the $130 billion mark by 2025, according to an October report by Google, Singapore state investor Temasek Holdings and global business consultants Bain & Company.

The new regulation, effective immediately after it was passed on Nov. 25, calls for foreign-based companies that actively trade in goods or services electronically in Indonesia to be considered as equal to having a physical presence in the country and thus, must follow all tax rules accordingly, a copy of the regulation obtained by Reuters showed.

This applies to all companies that meet certain criteria, including generating significant traffic from Indonesia or reaching a certain number of transactions in value or in volume, according to the regulation. No details were given.

Such companies will be required to appoint a representative within Indonesia’s jurisdiction who can act on its behalf, it said.

“This was designed to create a fair, if we can’t have a level, playing field,” said Susiwijono Mugiharso, secretary of the economic affairs ministry.

“All this time we have only been a market. But now, if they are actively capitalising on our market, they must also be present here,” he said.

Finance Minister Sri Mulyani Indrawati said on Nov. 22 she would file a bill in parliament this month that would allow authorities to recognise any big internet company with significant economic presence as an Indonesian tax resident, who must pay value added and corporate taxes.

Indonesia’s e-commerce association also welcomed the measure, describing the move as fair to local players, its chairman Ignatius Untung said.

“The old tax rules are no longer relevant in the current conditions,” Untung said.

The new regulation also covers broader rules for local online businesses, such as requiring them to protect customer data, provide customer service and to share data with authorities for statistical purposes.

The Indonesian government is struggling to meet its tax revenue target this year due to falling export earnings.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.