TikTok will start collecting value-added tax for Indonesian government in September. (JG Photo/Dion Bisara)

TikTok, Facebook, Disney, Apple Agree to Collect 10% VAT for Indonesia


AUGUST 07, 2020

Jakarta. Global technology giants like Apple, Facebook, and TikTok have followed Netflix's footsteps to collect value-added tax on digital services or products they sold to Indonesians starting next month, the county tax office announced on Friday.

The announcement marks swift progress in the government effort to collects state revenue from cross-border digital transactions that until recently go tax-free. 

Hestu Yoga Saksama, the spokesman at the Directorate General of Taxes at the Finance Ministry said VAT collection on digital products and services like apps downloads or movie streaming from foreign business "was not effective in the past because it relied on the consumer to collect and report the tax" to the tax office. 

So from July 1, the tax office requires foreign companies to start collecting the taxes. Movie streaming provider Netflix, music streamer Spotify, and search engine giant Google was among the first to agree with the arrangement last month.

Ten more companies joined this month, Hestu said. They comprise three companies affiliated to the social network giant Facebook, including Facebook Ireland, Facebook Payments International, and Facebook Technologies International. 

Amazon.com Services, Amazon's audiobook company Audible, Amazon's web traffic analysis firm Alexa Internet followed their sister company Amazon Web Services that joined earlier. 

Apple Distribution International, a growing video-sharing company Tiktok and entertainment conglomerate The Walt Disney Company (Southeast Asia), also agreed to the VAT scheme. 

These companies would be responsible for "charging VAT on sales of digital products," making a monthly payment to the Indonesian government, and submitting a quarterly VAT return to the Indonesian Directorate General of Taxes," the tax office said on its website. 

VAT tax on foreign business was one of the government's attempts to expand the base for tax revenue by tapping into the country's fast-growing digital economy. 

A report from Google and Singapore's sovereign wealth fund Temasek estimated Indonesia digital economy would triple to $133 billion from $40 billion in 2019. Online media like e-books, games, movies, and music account for the least of the market. But, it will still double to $9 billion in 2025 from 4 billion last year.

E-commerce account for around half of the digital market last year, followed by online travel and ride-hailing.