Tax rate by region Indonesia

Select region

Understanding SaaS Sales Tax in Indonesia: A Comprehensive Guide for Businesses

As Indonesia’s digital economy rapidly expands, businesses operating in the software-as-a-service (SaaS) sector must navigate the complexities of sales tax compliance. The Indonesian government implemented a 10% Value Added Tax (VAT) on SaaS and other digital services in 2020, aligning with its commitment to modernize the tax framework and enhance revenue generation. This guide provides a comprehensive overview of SaaS sales tax in Indonesia, equipping businesses with the knowledge and practical advice to ensure compliance and optimize their operations.

Indonesia

Indonesia adopted a VAT system in 1984 to enhance revenue generation and modernize its tax framework.

Official government link: Direktorat Jenderal Pajak

10.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

Zero rate may be applied to taxable goods provided in the Free Trade Zones (FTZ)

Exempted product categories

No specific digital goods or services categories are exempt

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Once the threshold has been exceeded

Online registration possible

Local representative needed

Yes

Registration procedure

In Indonesia, businesses are required to submit their VAT application using a physical form provided by the Directorate General of Taxes (DGT) to the local tax office. This application must include the company’s incorporation document and the identification documents of the owner. Once the VAT application is approved, the business must secure an electronic certificate and activate the company’s VAT account, all within a span of 3 months.

List of digital and electronic services liable for tax

Books, magazines, newspapers;
Apps, games, computer software;
Movies, music;
Subscriptions on digital services;
Design, marketing, advertising services.

Penalties

Late registration: A fine of IDR 1,000,000;
Late filing of VAT returns: A fine of 2% of the VAT payable;
Late payment of VAT: Interest at 2% per month on the unpaid amount;
Failure to issue tax invoices: A fine of 1% of the transaction value.

Registration threshold

Annually: IDR 600.000.000 USD 37.300
Monthly: IDR 50.000.000 USD 3.100

Filing interval

Monthly

Filing deadline

By the last day of the following month

E-invoicing requirements

Not specified

Record keeping

Businesses are required to keep detailed and accurate records of all their transactions. These records should be preserved for at least 10 years and must be easily accessible for review by the tax authorities.

Effortless Subscription Management and Billing

Key Compliance Requirements: Navigating the Regulatory Landscape

Understanding the compliance requirements associated with SaaS sales tax in Indonesia is crucial for businesses to avoid penalties and maintain a healthy financial standing. Businesses must diligently file VAT returns on a monthly basis, ensuring that payments are made by the last day of the following month. Additionally, meticulous record-keeping is essential, with businesses required to preserve accurate transaction records for at least 10 years and maintain them readily accessible for potential tax audits. While e-invoicing is not currently mandated, it is highly recommended as it streamlines the invoicing process and reduces the risk of errors.

Optimizing Tax Management: Practical Strategies for SaaS Businesses

To effectively manage SaaS sales tax in Indonesia, businesses are encouraged to adopt a proactive approach. Maintaining open communication with tax authorities and seeking guidance from experienced professionals can ensure accurate compliance and minimize potential issues. Additionally, businesses can leverage technology solutions like e-invoicing platforms to automate their tax processes, improving efficiency and reducing administrative burdens. Consulting with tax experts can provide valuable insights and tailored guidance, ensuring that businesses remain compliant and optimize their tax management strategies.

Ready to get started?

We’ve been where you are. Let’s share our 18 years of experience and make your global dreams a reality.

Talk to an Expert