Indonesia to push rep offices of giant tech firms Google, Facebook, Twitter, others to pay taxes

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President Joko Widodo was accompanied by Google CEO during a dialogue at Google headquarter (credit: Setkab.go.id]

JAKARTA (TheInsiderStories) – Indonesia’s Directorate General for Taxation Office has declared representative office of giant global tech companies, including Google, Facebook and Twitter as Permanent Establishment entities or Bentuk Usaha Tetap (BUT). As a result, these companies will have to pay normal taxes, just like any other foreign direct investment companies.

The article 2, verse (5) of the Income Tax Law,  Permanent Establishment (BUT) is defined as a business entity which is used by a businessman, who is not living in Indonesia or staying in Indonesia no later than 12 months, or business entity which is not reside in Indonesia, but runs operations in Indonesia.

Finance Minister Bambang Brodjonegoro told a press conference late Wednesday that by nature representative offices are not supposed to conduct profitable business and make money. However, many representative offices are conducting business just like operating companies.

Therefore, the Taxation Office has declared those representative offices that conduct business just like operating company to pay normal tax, namely income tax (PPh) and value added tax (VAT) for any transactions that they made, such as advertising, and so on.

Director General for Taxation Ken Dwijugiasteadi said there are around 3,500 representative offices in Indonesia. The tax office will examine all of them.

Muhammad Haniv, the Head of Tax Office for Special Area Jakarta, said many of these representative offices are making money from selling advertising spaces. Therefore, they should pay value added taxes.

Haniv said these representative offices currently only pay taxes for their employees.

Minister Bambang said Indonesia is not alone in scrutinizing global tech companies. A number of companies such as France has managed to push giant global tech companies to pay taxes.

He said it is time for the Indonesian government to pay serious attention on tax obedience of tech companies.

Haniv added his office is currently examining 19 representative, which are under special examination status and will be followed by other rep offices.

Asked how much potential taxes that these rep offices have to pay, Haniv said it could be trillions of rupiah. “But we could not estimate it yet,” he said, adding that the tax office will examine their tax compliance for the last five years. (*)

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Source: The Insiderstories
Indonesia to push rep offices of giant tech firms Google, Facebook, Twitter, others to pay taxes

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