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Tax flash nov 19


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Tax flash November 2019

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Tax flash nov 19

  1. 1. TAX FLASH “Digital economy should not forget the best inter- est of each and every people. No one should be left behind.” - President Joko Widodo at G20 Summit in Osaka, Japan, 28 June 2019 In This Issue • Digital 2019 Spot- light • Palapa Unifies Nusantara • E-Commerce Tax (DJP) • KIB Highlight Ser- vice: Tax Diagnostic Review (TDR) • KIB New Branch Office • Our Involvement SEA Internet Economy (GMV, $ B) “Dominating the SEA E-conomy” Home to 150 million internet users and 355 mil- lion mobile subscriptions, the world would por- tray Indonesia as the biggest if not yet the lead- er in SEA digital economy. While there is a high level of interest from governments, businesses, and individuals in the region to support the growth of the digital economy and maximize its benefits, still there are signs that despite the rapid growth in the re- gion, many gaps remain that must be addressed if the digi- tal economy is to achieve its potential. KIB E-newsletter Nov 2019 Indonesia is the largest and fastest growing internet economy in the region at $40B @49% CAGR Source: Google Temasek Bain & Company
  2. 2. Digital 2019 Spotlight Indonesia has the highest rate of e-commerce use of any country in the world. Key Points: 1. With 90% of the country’s internet users between the ages of 16—64 reporting that they already buy products and services online. 2. Despite these high levels of use, the overall value of the e-commerce market in Indonesia remains relatively low. Statista reports that the av- erage Indonesian e-commerce shopper spent just US$ 89 on online consumer goods purchases in 2018, this figure does not include spend on travel or digital media. “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” -Charles Darwin Searched Online for a product or service to buy Visited an Online Retail Store or Site (any device) Purchased a product or ser- vice online (any device) Made an Online Pur- chase via a laptop or desk- top computer Made an Online Pur- chase via a mobile phone 96% 91% 90% 29% 79% Percentage of internet users aged 16 to 64 who report performing each activity in the past month (survey based) Source: Hootsuite ;We are social
  3. 3. Digital 2019 Spotlight “As CEO, my main job is editor-in-chief” - Jack Dorsey Non-automotive retail sales contribution to GDP (price based) Retail Online Sales Growth (US$ billion) Source: BPSSource: CLSA Source: CLSA
  4. 4. Digital 2019 Spotlight “Customers should be # 1, Employees # 2, and then only your Shareholders come at # 3” - Jack Ma Source: CLSA Indonesia E-commerce Market Share 2019 Population Internet Users Social Me- dia Users Mobile Subscrip- tions Mobile Social Users 268.2 150.0 150.0 355.5 130.0 69.24 57.00 51.00 92.33 49.00 96.96 64.00 62.00 143.30 58.00 5.83 4.92 4.60 8.37 4.20 107.3 76.0 76.0 124.2 72.0 32.25 25.28 25.00 40.24 24.00 Country Indonesia Thailand Vietnam Singapore Philippines Malaysia
  5. 5. Digital 2019 Spotlight E-commerce in Indonesia. Key Points: 1. Indonesia spends US$20.3 billion online in 2018, an increase of US$3.3 billion—or 20 percent—compared to 2017. 2. The figure included US$9.5 billion online purchases of consumer goods like fashion, electronics, and groceries, while US$9.4 billion went to online travel purchases. 3. The remaining US$1.4 billion went on digital media purchases, of which the lion’s share – US$850 million—went on video games. 4. Despite this strong growth, research firm IGD reports that online shop- ping will still account for less than 2 percent of Indonesia’s total gro- cery spend by 2022. “Our movements and feelings are constantly monitored, because surveillance is the business model of the digital age” -Katharine Viner Annual change in the total amount spent on consumer E-Commerce Category. Homegrown e- commerce unicorn Tokopedia tops SimilarWeb’s rankings of transactional websites in Indonesia, with the platform’s website attracting an average of roughly 125 million visits every month. A local player dominates Indonesia’s online travel sector, with Traveloka attracting an average of 38 million visits per month over the past 3 months. Source: Hootsuite ;We are social Fashion & Beauty Electronics & Physical Media Food & Personal Care Toys, DIY & Hobbies Travel (Including accommoda- tion) Digital Music +18% +24% +30% +25% +17% +8.2% E-commerce Growth By Category
  6. 6. The Internet Unifies The Palapa Ring that unites Nusantara Key Points: 1. Launched on Oct 14, 2019, the Rp. 21.63 trillion (US$1.5 billion) the broadband infrastructure helped fulfill one of Patih Gajah Mada’s goals. 2. The Palapa Ring shall unify Indonesian to the outermost parts of the country — fiber optic infrastructure that spans 36,000 km. 3. Connecting the previously uncovered 5.8 million citizens in 57 cities and regen- cies using 12,148 kilometers of fiber optic cable and 55 microwave link hops. 4. With greater internet connectivity, we have high hopes in The Palapa Ring to balancing and strengthening the digital economy and the nation’s security. He, Gajah Mada Patih Amangkubumi, does not wish to cease his fasting. Gajah Mada: “If (I succeed) in defeating (conquering) Nusantara, (then) I will break my fast. If Gurun, Seram, Tanjung Pura, Haru, Pahang, Dompo, Bali, Sunda, Palembang, Temasek, are all defeated, (then) I will break my fast.” - Gajah Mada
  7. 7. E-commerce E-commerce Taxation “People who complain about taxes can be divided into two classes: men and women” -Anonymous Income Tax (PPh Pajak Penghasilan) ● Object = income derived from goods and services sold online ● Subject = Individual Tax Payer / Corporate Tax Payer who receives income from online transac"on. ● Type of payable tax = Ar"cle 4(1) jo (2), Ar"cle 15, Ar"cle 17, 21, 22, 23 and 26 SE—62/PJ/2013 reaffirms the following 4 models of e-commerce transaction: 1. Online Marketplace 2. Classified Ads 3. Daily Deals 4. Online Shopping Value-Added Tax (PPN Pajak Pertambahan Nilai) ● Object The ac"vity of delivering taxable goods (BKP Barang Kena Pajak) or taxable services (JKP Jasa Kena Pajak) within the custom and excise territorial where the online transact- "on is being held. ● Tax Basis (DPP Dasar Pengenaan Pajak) = sales price, exchange value, and export value, including applicable delivery/shipping costs and insurances. An exemp"on applies to a PPN being withheld and discount as shown on the tax invoice. ● The date shown on a tax invoice = the date of PPN becomes payable. ● Referring to online payment method, payable PPN is classified into two categories : √ Cash on delivery, PPN becomes payable when BKP or JKP was handed over or delivered to the buyer √ Non-cash on delivery, PPN becomes payable on the same date as recorded when payment was made by the buyer
  8. 8. E-commerce PMK No.210/PMK.010/2018 “People who complain about taxes can be divided into two classes: men and women” -Anonymous The Minister of Finance Regulation (PMK) was meant to acquire real information from businesses / entrepreneurs. ● It implied to an assumption, that e-commerce businesses/ subjects are not a compliant tax payer. ● Had held against the self-assessment principle —the basic principle of taxation ● Indicated weaknesses in the DGT’s database and administration system Reflection Note √ Having missed undertood of the existing Tax Law and regulations (UU KUP), Income Tax (PPh), and Value-Added Tax (PPN), when the PMK was drafted. √ The regulator (government) needs to collaborate with e-commerce businesses and adapt with the digital economy ecosystem. This will allow the regulator to better understand what the subjects / business needs, and eventually able to draft the best suited new fiscal policy.
  9. 9. E-commerce Tax Omnibus Law “C but in this world nothing, can be said to be certain, except death and taxes.” - Benjamin Franklin A definition by A draft law before a legislature which contains more than one substantive matter, or several minor matters which have been combined into one bill, ostensibly for the sake of convenience. No. Subject Currently Enforced Draft Law a VAT withholding & pay- ment typically due on events involving import of intangible goods and ser- vices Being done by the con- sumer (party who is doing the import), domestically— providing the SPP (Tax Payment Slip) Referring: 1. SPLN (Foreign Tax Payer) - Foreign trader, services, and platform - to withhold, pay, and submit report on VAT. 2. SPLN to appoint its representa- tive in Indonesia to withhold, pay, and submit report on VAT on behalf of the SPLN. b Taxable income of transac- tion being done electroni- cally in Indonesia by SPLN without having physically presence in Indonesia None a. To regulate definition of BUT (permanent establishment) that is not only referred on its physical presence, but also it should be based on its significant economic presence. b. Tax Tariff and taxable income will be based on the constituted tax income law.
  10. 10. Our Services Tax Diagnostic Review “ You can’t tax business. Business doesn’t pay taxes, it collects taxes” - Ronald Reagan Assessment Result Review Recommendation • Understanding the business process • Itemize type of taxes and obliga- tions involved • Going over busi- ness book keep- ing, admin, and tax compliance • Potential Tax Liabilities • Book keeping error • Financial State- ment misrepresen- tation • Book keeping ad- justment • Tax return correc- tion • Prepare support- ing documents • Communication with related par- ties
  11. 11. KIB New Branch Office “KIB = Kita Itu Bisa” -Bambang Suwarso We are pleased to announce the opening of our new branch office at Gold Coast, Pantai Indah Kapuk, North Jakarta on Tuesday, October 29, 2019. KIB Consulting is committed to better serve our clients exclusively and professionally. Gold Coast Eiffel Tower 12th Fl. Unit N Pantai Indah Kapuk North Jakarta -144550
  12. 12. Our Involvement At izincoid Tax Talk Oct 24, 2019 Coordination meeting at The Ministry of Trade on Trade Mission to Brazil, Chile, Korea, and Taiwan
  13. 13. Our Involvement South and Southeast Asian Business Leaders, Chengdu, China, Sep 18, 2019
  14. 14. Our Involvement Apindo— RMB Internationalization: Prospect and Challenges to Indonesian Market, 27 August 2019
  15. 15. Tunnel of Củ Chi , Ho Chi Minh (Saigon), Vietnam Contact Us Phone: (62-21) 2929 5870-73 Bambang B. Suwarso bambang.suwarso@kib- Rachmat Kurniawan rachmat@kib- Yosefine Amelia yosefine@kib- Raden Roro Ratna Indah Wulandari wulan@kib- Addresses: North Jakarta —144550 Indonesia The Koppel Building Suite IB. Jalan Pluit Selatan Raya no. 10 Gold Coast Tower Eiffel Unit N Pantai Indah Kapuk Disclaimer: The facts and opinions stated or expressed in this publication are for information purposes only, and are not necessary and/or must not be relied upon as being to those of the publisher or of the institu- tions for which the contributing authors work. Although every part of content has been taken to ensure the accuracy of the information contained within this publication, it should not be by any person relied upon as the basis for taking any action or making any decision. KIB Consulting and its representative, cannot be held liable or otherwise be responsible in anyway for any advice, action taken or decision made on the basis of the facts, surveys, and opinions stated or expressed within this publication. KIB goes to Vietnam, October 18—21, 2019; In front of The Presidential Palace, Hanoi, Vietnam KIB Outing