Ministry of Finance Highlights Foreign OTT Tax Compliance in Indonesia

The digital economy era has succeeded in giving birth to many giants in the business world, especially those who play in the realm of digital technology. Multiple players Over-the-Top (OTT) that are already known are Yahoo, Google, Twitter and Facebook. The four of them, although Yahoo has closed its representative office in Indonesia, are currently under the spotlight by the Ministry of Finance regarding tax payment compliance in Indonesia.

Minister of Finance Bambang PS Brodjonegoro, such as reported Kompas, said that each of the four foreign technology companies is currently under investigation regarding their tax payment compliance.

However, Bambang also explained that the Directorate General of Taxes (DGT) must clarify the status of the four giant companies before exploring their tax potential further. Is it already in the form of a Permanent Business Entity (BUT) or is it still a representative office.

The status of the four giant business entities

Bambang said that Yahoo and Google are companies with BUT status, while Facebook and Twitter are still representative offices.

Yahoo itself has been registered with the Tanah Abang Pratama Tax Service Office as a domestic legal entity with foreign investment status (PMA) since 2009. While Google has been registered with the Tanah Abang KPP with PMA status since September 15, 2011. Each of them acts as dependentagent from his Singapore-based company.

“So in accordance with Article (2) Paragraph (5) letter (N) of the PPH Law, he [both Google and Yahoo] has the status of BUT. […] Income from Indonesia, such as advertising, should be income from our PPH [Indonesia] […] in accordance with Article (5) Paragraph (1) of the PPH Law,” said Bambang.

Meanwhile, Facebook and Twitter themselves are currently registered at the KPP for Agency and Foreigners. However, its status is only as a representative office. Twitter was only registered as a representative office on April 22, 2015. While Facebook has been registered since April 10, 2014.

Bambang said, “So Twitter is almost the same story as Yahoo. The difference is, if Yahoo has [formed] PT. If he [Twitter] only representative office from Twitter Asia-Pacific.”

Currently, the four companies are under special inspection by the Jakarta Regional Office of the DGT. The purpose of this inspection is to ensure that the four foreign information technology companies have reported all revenues from Indonesia. The results of this examination will later be used to re-check whether the tax payment process is correct or not.

For your information, Kemenkominfo some time ago has confirmed that it will issue a Ministerial Regulation that regulates the obligation to establish a Permanent Business Entity for all OTT services operating in Indonesia. If the OTT service does not have a BUT, it means that it includes a company that does not pay any taxes to the country and is in danger of being blocked.