Technical / Indonesia imposes 10% VAT on Facebook, Disney, TikTok

JAKARTA- Indonesia has added more technology companies that will be obligated to apply 10% value-added tax on sales to Indonesian customers to include Facebook, Disney and TikTok, its tax office said on Friday.

Southeast Asia’s biggest country, which has a population of nearly 270 million people, announced last month a 10% VAT on sales by technology firms including Amazon, Netflix, Spotify and Google, as spending patterns shift with increased remote working amid the coronavirus pandemic, which has hit government finances.

The additional companies announced on Friday include three units of Facebook, Tiktok Pte Ltd, Apple Distribution International Ltd, The Walt Disney Company (Southeast Asia) Pte Ltd, and more of Amazon’s subsidiaries, including its audiobook unit Audible and its voice assistant Alexa.

Facebook said the company would comply.

“In Indonesia, we will start collecting VAT as of September 1, 2020, as required under Indonesia regulations,” a Facebook spokeswoman said.

The other companies did not immediately respond to requests to comment.

Under the rules, non-resident foreign firms which sell digital products and services in Indonesia worth at least 600 million rupiah ($41,040) a year, or which generate yearly traffic from at least 12,000 users, must pay the 10% VAT.

Tech giants are increasingly facing tougher fiscal regimes in Southeast Asia, including in Thailand and the Philippines, where legislation pending house approval proposes VAT of 7% and 12% respectively.

The Indonesian tax office in a statement said it continues to identify other technology companies to inform them of the digital tax rules, adding the number of firms subject to the VAT would likely increase.

The VAT rules aim to create a level playing field between foreign and local companies and between conventional and digital businesses, it said.

Indonesia expects a 13% annual drop in state revenue this year as the coronavirus disrupts business activity.