On Friday, Indonesia’s tax office said that they have added more technology companies including Facebook, TikTok, and Disney on which the country will apply a 10% value-added tax on sales to Indonesian customers.
Indonesia is the biggest country in Southeast Asia with a population of nearly 270 million people. Last month, the country announced that they will be applying a 10% VAT on sales of firms including Netflix, Amazon, Spotify, and Google. The move comes as the spending patterns shift with increased remote working amid the coronavirus pandemic.
On Friday, they announced additional companies include three units of Facebook, Apple Distribution International Ltd, Tiktok Pte Ltd, The Walt Disney Company Pte Ltd, and Amazon’s subsidiaries. Till now only Facebook said that it will comply.
A Facebook spokeswoman said, “In Indonesia, we will start collecting VAT as of September 1, 2020, as required under Indonesia regulations.”
In Indonesia, according to the new rules, all the non-resident foreign firms selling digital products and services with a worth of more than or at least 600 million rupiah ($41,040) a year must pay the 10% VAT. This also applies to firms that generate yearly traffic from at least 12,000 users.
In Southeast Asia, tech giants are increasingly facing tougher fiscal regimes. Some of the countries that are imposing these new systems include Thailand and the Philippines. In both, countries legislation is pending house approval proposes VAT of 7% and 12% respectively.
In a statement, the Indonesian tax office said that it will continue to identify technology companies and inform them of the digital tax rules. They also added that the number of firms subject to the VAT will likely increase.
Through new VAT rules, Indonesia is aiming to create a level playing field between conventional and digital businesses and foreign and local companies.
Indonesia as the pandemic has disrupted several business activities they expect a 13% annual drop in state revenue this year.