Indonesia wants VAT on e-commerce
Indonesia is the latest Asia Pacific country to indicate it wants to start levying VAT on e-commerce sales of goods to consumers.
Currently, domestic online retailers are exempt from the Indonesian VAT, which is charged at 10%. However, the Finance Ministry is concerned that this gives it an unfair advantage over bricks and mortar retailers who do have to charge the consumption tax. As the online sector is now starting to grow quickly, the issue has become a major concern for the tax authorities who are worried about missed tax revenues.
The proposed tax, with a VAT registration threshold of RP4,800m, will only be applicable initially to Indonesia-based retailers. This will change will apply only to domestic internet retailers, which will leave foreign online retailers VAT exempt.
However, since imports still face a heft import VAT bill – 10% to 200% for some luxury goods – the tax burden on e-retailers remains exceedingly high.
VAT on international e-commerce
The EU VAT on distance selling regime has been successfully in operation for many years, but other countries have been slow to follow suit. The US only charges Sales Tax on e-retailing if the online retailer has an in-state nexus (permanent establishment) – although States are increasing looking to charge out-of-state retailers (e.g. New York), and their is a Bill working its way through Congress to enable States to levy US Sales tax on all out-of-state retailers. Japan is planning for Consumption Tax on e-commerce by foreign retailers, whereas Australia GST on foreign internet sales has stalled.