Tax Application of Electronic System Trade Transaction

Background

On 31 of December 2018, the Government of Republic of Indonesia enacted the Minister of Finance Regulation No. 210 of 2018 on Tax Enforcement of Electronic System Trade Transaction.

VAT, Sales Tax on Luxury Goods, and Income Tax Treatment of Electronic System Trade Transaction.

Electronic system trade transaction of goods and/or services in the customs area can be conducted through:

  • marketplace platform; or
  • platform other than a marketplace that can be in the form of online retail, classified ads, daily deals, or social media.

The platform is a container in the form of applications, websites, and/or other Internet-based content services that are used for transactions and/or facilitation of trade through electronic systems (e-commerce). Marketplace is electronic communication facilities used for transactions intended to conduct trading business electronically.

Electronic system trade transaction of goods and/or services in the customs area through marketplace platform can be conducted by:

  1. marketplace platform provider providing trade service through an electronic system for goods and/or service;
  2. trader or service provider use platform facilities provided by marketplace platform provider for trade through an electronic system.
  3. goods buyer and client make purchases of goods and/or service through a marketplace platform provider;
  4. payment of trade in goods and services through an electronic system by the buyer to trader or service provider is done through marketplace platform provider.

Marketplace platform provider that provides trading services through an electronic system on goods and/or service must have a taxpayer identification number and must be confirmed as a taxable entrepreneur for VAT purposes and carry out income tax obligations in accordance with the legislation.

Obligation to be confirmed as a taxable entrepreneur for VAT purposes also applied to a marketplace platform provider, although meeting the criteria as a small businessman in accordance with Minister of Finance regulation on limitations of small businessman value-added Tax (“VAT”).

Trader or service provider consisting of trader or service provider that has been upheld as a taxable entrepreneur and trader or service provider not yet upheld as a taxable entrepreneur must notify their taxpayer identification number to the marketplace platform provider.

Tax Treatment for Trader and Service Provider

Trader or service provider who delivers goods and/or service electronically through marketplace platform provider carry out income tax obligations in accordance with the regulation.

A taxable entrepreneur for VAT purposes trader or taxable entrepreneur for VAT purposes service provider and/or taxable services electronically through marketplace platform provider must collect, deposit, and report:

  • owed VAT; or
  • VAT and sales tax on luxury goods.

The VAT payable is equal to 10% from transaction value of the delivery of taxable goods and/or taxable services, whereas sales tax on luxury goods follows rates and procedures for depositing and reporting in accordance with the regulation.

A taxable entrepreneur for VAT purposes trader or taxable entrepreneur for VAT purposes service provider must make a tax invoice as evidence of levy on VAT on the delivery of taxable goods and/or taxable services.

A taxable entrepreneur for VAT purposes trader or taxable entrepreneur for VAT purposes service provider must report every tax period on delivery of taxable goods and/or taxable services through marketplace platform provider.

Tax Treatment for Platform Marketplace Provider

Payment for submission of taxable goods and/or taxable services made by the taxable entrepreneur for VAT purposes trader or taxable entrepreneur for VAT purposes service provider received by marketplace platform provider form the buyer includes transaction value or VAT and the sales tax on luxury goods.

Marketplace platform provider must report recapitulation of trade transactions conducted by traders and/or service provider through marketplace platform provider to Directorate General of Taxes and must be attached inside the tax return marketplace platform provider period.

A taxable entrepreneur for VAT purposes marketplace platform provider who carries out activities:

  1. marketplace platform service provision for trader or service provider;
  2. taxable goods and/or taxable services submission is done through marketplace platform provider;
  3. taxable goods and/or taxable services submission other than as referred to in letter a and letter b,

must collect VAT for service provision and taxable goods and/or taxable services submission and make a tax invoice and report for taxable goods and/or taxable services submission implemented in tax return VAT period.

VAT, sales tax on luxury goods, and income tax of good and service trade imposition through an electronic system in the form of online retail, classified ads, daily deals, or social media is carried out according to the regulation.

Marketplace platform provider can provide data and information to Directorate General of Taxes about e-commerce transactions based on:

  1. financial information obtained from financial services institution, other financial services institution, and/or other entity;
  2. data and information obtained from government agencies, institution, association, and other party and/or:
  3. data and information available at Directorate General of Taxes Information system, Director General of Taxes can do testing tax compliance obligations on e-commerce transaction in accordance with tax regulation.

Import Duty Treatment and/or Import Tax on the Import of Goods for an Electronic Trade Transaction

The treatment of imports of goods whose transaction are carried out through Platform Marketplace provider

  1. Import of goods which:
    1. the transaction through marketplace platform provider registered at Directorate General of Custom and Excises;
    2. shipping is conducted through postal operators.
    3. have customs value up to Free On Board US$ 1,500,
  2. Import of goods whose transaction are carried out through a marketplace platform provider:
    1. have customs value more than free on board US$ 1,500; or
    2. not use Delivery Duty Paid (“DDP”) scheme,
      is carried out in accordance with the regulation stipulating the import provision of delivered good.

Marketplace platform provider submits an application for registration to Head of Customs Office who has a high frequency of imports of goods whose transactions are carried out through that marketplace platform provider.

The application includes information that contains at least:

  • Taxpayer Identification Number;
  • The number of Inauguration Decision Letter of Taxable Entrepreneur for VAT Purposes; and
  • The number of the Certificate of Registration as a taxpayer.

Approval letter or rejection letter given by the Head of the Customs Office to the application within a maximum of 1 week after the application is received and that regulation applies nationally.

Marketplace platform provider treatment
After getting approval, marketplace platform provider must deliver:

  • E-invoice for every delivery of goods transaction; and
  • E-catalog
    For Directorate General of Customs and Excises.

E-catalog contains at least information about:

  • Description of goods;
  • Item code;
  • Item category;
  • Item specification;
  • Price of goods;
  • Trader identity; and
  • Country of origin,
    and update must be made of the item with a change in price

Marketplace platform provider must use DDP scheme and calculate import duty and/or import tax on the import of goods and responsible for the duty of import and/or import tax on the import of goods.

Freezing and Revocation of Marketplace Platform Provider Approval

Head of Customs office freezes the registered marketplace platform provider approval in the event that marketplace platform provider does not fulfill the obligation to import duty deposit and/or import tax on the import of goods through the issuance of freezing letters.

Freezing is made until the marketplace platform provider fulfill the obligation to import duty deposit and/or import tax on the import of goods. In the event that marketplace platform provider has fulfilled the obligation to import duty deposit and/or import tax on the import of goods, and then Head of Customs Office issued a revocation letter for freezing.

Head of Customs Office revocation registered marketplace platform approval, in term of:

  1. marketplace platform provider does not use DDP scheme within 12 months continuously;
  2. business license as a marketplace platform provider has been invalid or revoked;
  3. there is evidence that marketplace platform provider committed violations in the customs sector;
  4. request from marketplace platform provider; or
  5. marketplace platform was declared bankrupt by the commercial court.

For the revocation, a letter of revocation was issued by the Head of the Office.

* The Minister of Finance Regulation No. 210 of 2018 on Tax Enforcement of Electronic System Trade Transaction is withdrawn and declared invalid under the Minister of Finance Regulation No. 31/PMK.010/2019.


Melvin Julian

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