Google Tax Issues in Indonesia

Since some time ago, PT Google Indonesia has become a hot topic of discussion regarding the refusal of the audit conducted by the Directorate General of Taxes (DGT). This was as stated by Muhammad Hanif as Head of the Regional Office of the Special Directorate General of Taxes, in a press conference at the office of the Directorate General of Taxes last Thursday (15/9).

However, according to Google Indonesia's Head of Corporate Communication Jason Tedjasukmana, his party claims to have always been cooperative in tax matters. As a PT that has been established in Indonesia since 2011, Google Indonesia claims to have complied with paying taxes in accordance with applicable regulations in Indonesia. So what are the problems that make the Directorate General of Taxes want to conduct an audit of Google?

Google is considered not yet in the form of a permanent business

According to Hanif, the current status of PT Google Indonesia not a Permanent Establishment (BUT). BUT status is needed by multi-national companies such as Google to be able to earn income in Indonesia. Meanwhile, Google is assessed by the Directorate General of Taxes as having received income from within the country, especially from online advertising services offered.

When a company like Google has a BUT status, then every transaction that enters it (in this case the sale and purchase of services) will be subject to withholding Value Added Tax (VAT). The Directorate General of Taxes believes that Google is not currently BUT, so companies or partners that transact with it are not required to pay VAT.

We had time length and width discuss about this BUT, which basically:

Permanent establishment refers to a place and business facilities that are permanent in nature and are used to carry out the business or activities of an individual who does not reside or an entity that is not established and is not domiciled in Indonesia.

[See also:Explanation of the Obligation to Establish a Permanent Establishment for Foreign Technology Companies]

In addition to VAT, companies that are not yet in the form of BUT are also not obliged to pay Income Tax (PPh). Because the condition for enabling PPh by a multi-national company is in the form of BUT. According to the Directorate General of Taxes, the income earned by Google in Indonesia is already very large, so a search is needed.

Google Indonesia office status as representative office

Google Indonesia currently has the status as a PT and has an office in Indonesia. However, according to the Directorate General of Taxes, as conveyed by Hanif's press statement, the office is currently only a representation or a representative office, not yet a BUT. Representative offices generally only act as intermediaries to deposit a small part of the total transaction value. In this case, Hanif assesses that the deposit is new fee only, the value is only a few percent of revenue.

This attempt to search Google also seems to be a strong government ambition. One of the supports was given by Commission XI of the DPR RI, in this case it was conveyed by Mukhammad Misbakhun. His party demanded the Directorate General of Taxes to act decisively, even asking the tax authorities in Indonesia to take stricter action if Google did not cooperate with the examination.

Google's refusal to audit is now forcing the Directorate General of Taxes to step up to the investigative stage.

It doesn't just happen in Indonesia

This is not the first time that this is not the first time this problem has occurred due to taxation by government authorities against Google. Previously last May Google office in Paris also sued because of taxes. Local tax investigators raided the representative office located in the vicinity of the Gare Saint-Lazare area.

Google Indonesia has not yet stated what will be done to deal with this problem. This was also the response regarding the allegations of misconduct that were leveled against him. We are still trying to keep in touch with Google Indonesia to get the latest information about the steps that Google will take to resolve this issue.