23 Jun 2016
The Potential Loss of VAT on E-Commerce Transactions
Today, the way many of us live and work are influenced by the information technology. We use the Internet to look and apply for jobs, shopping, conduct research, make airline reservations, play online games and explore the various areas of interest. The rapid development of technology recently has an impact on various areas, including tax. The development of information and communication technology has led to the transformation of business models and strategies that directly or indirectly affect the state revenue in the form of taxes.
Currently, not many tax regulation governing e-commerce transactions, one of which is the Circular of the Director General of Tax No. SE-62/PJ/2013 regarding the affirmation of tax provisions on e-commerce transactions and more recently is the Circular of the Director General of Taxes No. SE-06/PJ/2015 regarding the withholding tax on e-commerce transactions.
This time, the author would like to discuss about the potential loss of VAT on the sale of goods and / or services in e-commerce transactions. Perhaps, in another occasion, the author will discuss about the withholding tax on e-commerce transactions.
As described in SE-62/PJ/2013, basically e-commerce transactions can be classified into four transaction models, namely Online Marketplace, Classified Ads, Daily deals and Online Retail.
Except for Classified Ads, in the other three models of e-commerce transactions, there is always a business process in the form of sales of goods and / or services. In those models of transactions, Tax Invoice is always issued by the seller or provider of goods and / or services to buyers of goods and / or services. For example, in the Online Marketplace, Tax Invoice is made by the Online Marketplace Merchant to the Buyer, in Daily Deals, Tax Invoice is issued by the Daily Deals Merchant to the Buyer, and in Online Retails, Tax Invoice is made by the Online Retail Organizer to the Buyer.
The above mechanism can be applied if the seller or provider of goods and / or services (the Merchant or Online Retail Organizer) is a Taxable Firm (PKP). In fact, most of the Merchant or Online Retail Organizers is not a Taxable Firm (PKP), because of non tax resident status who does not have a Permanent Establishment (BUT) in Indonesia such as Amazon, Ebay, Netflix, Bestbuy and many others.
Thus, the VAT collection mechanism that can be applied is through the import of taxable goods (BKP) or utilization of Taxable Intangible Goods and / or Services from outside the Customs Area, where the buyer or the parties who utilize the goods or services, settle the VAT due by their own.
As we understand, most of the buyers or those who utilize Intangible Taxable Goods or Taxable Services from Outside the Customs Area through e-commerce transactions are individual who are non Taxable Firm. On the other hand, the seller or provider of goods and / or services which is not a VAT-able Firm, also could not levy VAT on the sale of goods and / or services to buyers who are mostly individuals.
Since both parties do not levy VAT on the sale of goods and / or services through e-commerce transactions, it can be inferred that there will be loss of revenue from the VAT on the sale of goods and / or services through e-commerce transactions.
Indeed, the author has not conducted research on the amount of sales transactions of goods and / or services through e-commerce transactions. Nevertheless, the authors believe that the potential loss of tax revenue from VAT on the sale of goods and / or services through e-commerce transactions is quite substantial.
Therefore, it needs to consider the appropriate mechanism for the imposition of VAT on the sale of goods and / or services through e-commerce transactions so that the potential loss of tax revenue can be minimized. However, such a mechanism is also not to break the prevailing tax regulations, thus giving the impression that the tax system in Indonesia is not friendly to the business sectors.
Eddy Tan Hasan SH, SE, Ak., M.Ak., BKP, CA, CPA
Registered Tax Consultant
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