Indonesia Clarifies Digital Tax Scope

Indonesia's tax authority has clarified that its planned digital tax collection system will not impose new taxes on overseas transactions, following remarks by President Prabowo Subianto’s special envoy Hashim Djojohadikusumo.

The Foreign Digital Transaction Tax Collection System (SPP-TDLN) is designed to streamline the collection of value-added tax (VAT) on eligible digital transactions involving overseas service providers.

Director Inge Diana Rismawanti of the Directorate General of Taxes (DJP) stated that the system is intended to organize VAT collection on foreign digital transactions in a fairer, more orderly and technology-based manner.

She emphasized that the system does not introduce a new tax, change the existing VAT rate or apply to all overseas transactions. Instead, it aims to provide greater certainty, prevent double taxation and ensure equal treatment of domestic and foreign businesses.

Money transfers and remittances will not automatically become subject to VAT under the system. Inge clarified that SPP-TDLN was not intended to tax personal fund transfers or money sent by members of the public.

The system will also prevent double collection. If VAT on a foreign digital transaction has already been collected by an appointed e-commerce trader, the same transaction will not be taxed again through SPP-TDLN.

Before full implementation, SPP-TDLN underwent testing in a sandbox environment and a stabilization period to assess system readiness, business processes, data exchanges and integration with the parties involved in tax collection.

On Sept. 25, the DJP appointed six institutions as issuers responsible for collecting VAT under the system. Other prospective issuers are currently undergoing the stabilization process.