Indonesia drafts new rules to add VAT to online products

JAKARTA (Reuters) – Indonesia is drafting new rules to impose value added tax – VAT – to online products and services provided by offshore companies, as authorities target a bigger slice of revenue from the country’s fast-growing digital market, a top tax official told Reuters. “It’s the low hanging fruit and can be applied as per every country’s rules,” said Hutagaol, who heads the international department at the tax office. However, to charge VAT, Indonesia would need new “implementation rules to decide on the mechanism, because the current rules only apply to conventional transactions, while digital ones are not limited by space and time,” he said. He declined to say how long it might take to draft and bring in the new rules. In 2016, Indonesia investigated Alphabet Inc’s Google for alleged tax evasion, including missing VAT payments on advertising revenue, but authorities eventually reached an undisclosed settlement.

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