Indonesia to impose VAT on streaming, other digital services from July

The Netflix logo is shown in this illustration photograph in Encinitas, California October 14, 2014. REUTERS/Mike Blake

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, a tax official said on Friday.

It will impose 10% VAT on digital products sold by non-resident internet companies with a 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. Google could not be immediately reached for comment.

Indonesia currently charges a 10% 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 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.

Consumers have been buying fewer physical goods, but demand for digital items has risen, Indrawati has said.

The ministry’s tax department has been in contact with representatives of affected companies, but declined to name them, tax office spokesman Hestu Yoga Saksama said.

The government expects a 10% 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%, from 5% in 2019. It expects a fiscal deficit of 5.07% of GDP for 2020, the biggest in more than a decade.

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.

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

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.