Indonesia plans tax overhaul to make tech firms pay VAT, says finance minister

• Indonesia is preparing a Bill that will make tech firms such as Alphabet Inc’s Google and Amazon pay value added tax (VAT), Finance Minister Sri Mulyani Indrawati said.
• Such companies will be considered a “permanent establishment” liable for VAT in Indonesia regardless of whether they have a physical office in the country or not, Indrawati said in a statement issued by the Cabinet Secretariat On 3 Sep 19.
• The minister said it was “because they have what is called a significant economic presence, although they don’t have a branch here.”
• Google had a tax dispute with Jakarta in 2016 over alleged tax evasion, including missing VAT payments on advertising revenues, which it resolved with an undisclosed settlement.
• The Indonesian government has repeatedly said it wanted to make streaming service providers such as Netflix pay their fair share of taxes.
• The bill, which needs parliamentary approval, is part of broader tax reforms in Southeast Asia’s largest economy intended to improve revenue collection, increase compliance and attract investment.
• President Joko Widodo’s re-election campaign promise for a corporate tax cut will also be part of the bill, Indrawati said.
• The corporate tax will be gradually lowered to 20% starting 2021 from 25% now and companies listing their shares may be subjected to a lower rate of 17% for a period of five years, Finance Minister Sri Mulyani Indrawati told reporters after a cabinet meeting in Jakarta on 3 Sep 19.
• Lower taxes may help Indonesia compete with regional rivals like Vietnam and Thailand in luring companies seeking to relocate businesses from China as it spars with the United States on trade.
• The tax on dividend earned by local and foreign investors will be eliminated if it’s reinvested, Indrawati said.
• The government will also slash the penalty on taxpayers who correct their returns after filing and owe money to the exchequer, the minister said.
• Indonesia will adopt a “territorial” tax regime for personal income tax, a change from the current “world-wide” regime, she said.

External Link : https://www.malaymail.com/news/money/2019/09/04/indonesia-plans-tax-overhaul-to-make-tech-firms-pay-vat-says-finance-minist/1787170

External Link : https://www.bangkokpost.com/business/1742539/indonesia-plans-tax-cuts-to-lure-investment