After 28 foreign digital firms, now Indonesian government put value added tax (VAT) from eight tech companies- Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – After 28 foreign digital firms, now Indonesian government put value added tax (VAT) from eight tech companies. The companies are Alibaba Cloud (Singapore) Pte. Ltd., GitHub Inc., Microsoft Corp., Microsoft Regional Sales Pte. Ltd., UCWeb Singapore Pte. Ltd., To The New Pte. Ltd., Coda Payments Pte. Ltd., and Nexmo Inc.

The director general of tax at finance ministry office, Suryo Utomo, said in the official statement released on Friday (10/09). Their must pay the VAT from their digital products and services sold in Indonesia starting Nov. 1, 2020.

Last April, Indonesian government regulates the digital tax for global technology companies through a lieu of law Number 1 Year 2020 concerning Financial Policy in To Deal with the COVID-19. The rules are contained in article 6 of the new bill, which states the government will collect taxes from trading activities through the electronic system by foreign companies who meet the provisions of significant economic presence.

“Overseas traders or overseas providers who meet the provisions of significant economic presence can be treated as permanent business entities and subject to income tax. The rates, basis for imposition and procedures for calculating income tax and electronic transaction tax will be regulated by or based on government regulations,” said the article.

Since last year, the government aimed to collect value-added tax from foreign digital companies such as Google, Facebook, Amazon, Twitter, and Netflix, which lack a physical presence in the country but gain revenue from domestic consumers.

“In the new law, with the phenomenon known as a cross-border digital economy, the definition of a permanent establishment would no longer be based on physical presence. So, even if the companies do not open any offices in Indonesia, they still have a tax obligation because they have what is called a significant economic presence,” said finance minister, Sri Mulyani Indrawati on Nov. 22, 2019.

Moreover, the digital-based companies would be declared a foreign tax subject, which will mandate them to collect value-added tax from economic activities conducted in Indonesia and deposit taxes with the tax authority.

The country’ current tax code, last revised in 2000, has a loophole that has meant only companies domiciled in Indonesia have to pay taxes. This lets over-the-top media services to stream their movies to local customers without collecting value-added taxes like their local counterparts.

With the revised tax code, Indonesia is following in the footsteps of Singapore and Australia, countries that have implemented the so-called Netflix law. Governments around the world are banding together to try to find a way to collect tax from over-the-top media streaming services and other companies of their ilk.

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