The Minister of Finance in late March 2019 withdrew and revoked a regulation concerning the imposition of value added tax (VAT) on e-commerce transactions before the regulation was effective.
The regulation (No. 210/PMK.010/2018) was scheduled to be effective beginning 1 April 2019, and would have imposed VAT and “sales tax on luxury goods” on all e-commerce transactions—regardless of whether the trader or service provider was a “taxable entrepreneur.” Read TaxNewsFlash
Because the regulation was withdrawn, the existing income tax regulations will continue to apply for e-commerce transactions.
A circular letter (No. 24/PJ/2018) issued by the Director General of Tax addresses the tax treatment of incentives received by a buyer (a reseller) in connection with certain conditions to a sale and purchase transaction. The tax treatment applies whether the incentives are agreed upon in writing or verbally between the seller and the reseller and whether the incentives are provided in cash, as in-kind exchange, or a reduction of the reseller’s liability.
There are withholding tax requirements, depending on the type of incentive and whether the reseller is a domestic or foreign entity. These incentives are not to be considered as discounts, and the amount is not to be included in the commercial invoice or the VAT invoice to reduce the sales price.
The tax authority, thus, has clearly distinguished certain types of incentives and their related tax treatment.
Read an April 2019 report [PDF 1.4 MB] prepared by the KPMG member firm in Indonesia
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