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- Indonesia imposes a 10% Value Added Tax (VAT) on certain digital services provided by foreign companies to Indonesian consumers, effective April 1, 2020, and updated with regulations in...
- The tax aims to level the playing field between domestic and foreign digital service providers and increase state revenue.
- On january 26,2024,the Indonesian Ministry of finance issued Peraturan menteri Keuangan (PMK) No.
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Indonesia’s Digital Tax on Foreign services
Indonesia imposes a 10% Value Added Tax (VAT) on certain digital services provided by foreign companies to Indonesian consumers, effective April 1, 2020, and updated with regulations in 2023 and 2024.
The tax aims to level the playing field between domestic and foreign digital service providers and increase state revenue. Initially, the tax applied to digital products like streaming services, e-books, and online gaming.Recent regulations have expanded the scope to include a wider range of digital services. The Directorate General of Taxes (DGT) is responsible for administering and enforcing the tax.
On january 26,2024,the Indonesian Ministry of finance issued Peraturan menteri Keuangan (PMK) No. 12/2024, detailing the VAT treatment of foreign digital services. This regulation clarifies the obligations of foreign service providers and the procedures for tax collection and remittance.Prior to this, Peraturan Pemerintah (PP) No. 51/2023,issued in August 2023,also addressed these issues.
Who is Affected by the Digital Tax?
The digital tax primarily affects foreign companies that provide digital services to Indonesian consumers, even if they don’t have a physical presence in Indonesia.Indonesian consumers are also indirectly affected as the VAT is typically passed on to them through increased prices.
Digital services covered include, but are not limited to: electronic services, automated digital services, and services provided through digital interfaces or applications. Specifically, this includes things like online advertising, subscription services (video streaming, music streaming), and online gaming. The definition of “digital service” is broad and subject to interpretation by the DGT.
As of December 2023, over 130 foreign digital service providers had registered with the Indonesian tax authorities to comply with the regulations. The Directorate General of Taxes reported that these providers collectively contributed IDR 8.7 trillion (approximately $560 million USD as of january 12, 2026) in VAT revenue between April 2020 and November 2023.
How Does the Tax Work?
Foreign digital service providers are required to register with the Indonesian tax authorities, collect the 10% VAT from Indonesian consumers, and remit the tax to the government on a monthly basis. Registration is done through a dedicated online portal managed by the DGT.
The tax is applied to the gross amount of the digital service provided. Foreign providers can choose to appoint a local tax representative to handle their tax obligations on their behalf. Failure to comply with the regulations can result in penalties, including fines and potential blocking of access to the provider’s services in Indonesia.