Indonesia’s Updated VAT System for Cross-Border Digital Services

Indonesia has overhauled its VAT framework for cross-border digital transactions, creating a new compliance landscape for foreign investors and digital service providers. The updated system introduces a centralized collection mechanism to ensure that overseas digital activities are fully captured within the Indonesian tax net.

Understanding these changes is critical for structuring operations and avoiding compliance risks in one of Southeast Asia’s fastest-growing digital markets.

Regulatory framework for Indonesia’s cross-border VAT system

The revised framework establishes the Tax Collection System on Cross-Border Digital Transactions, known as SPP-TDLN. This regime mandates VAT collection on digital services and electronic information supplied by foreign entities to Indonesian users.

The system is designed to standardize collection, reporting, and remittance for cross-border digital transactions under a unified compliance structure.

Scope and definition of cross-border digital transactions

The SPP-TDLN system applies to digital services and information delivered electronically to Indonesian customers. This includes software-as-a-service platforms, streaming content, cloud computing, digital advertising, and downloadable media.

Only electronically delivered goods and services are covered, making the method of delivery essential in determining VAT liability.

VAT rate and base calculation

Indonesia’s VAT rate for digital services is set at 12 percent following the increase effective January 2025. The VAT base is calculated at 11/12 of the gross payment amount before VAT is applied.

This calculation method standardizes the effective tax burden on cross-border digital transactions while accommodating international billing practices.

Registration and operational requirements for foreign providers

Foreign service providers and digital marketplaces must register as VAT collectors if their annual transactions with Indonesian users exceed 600 million rupiah or if they serve more than 12,000 users in a year. Registration is handled through the Directorate General of Taxes’ online system, after which the provider is issued a tax identification number and authorized to collect VAT.

A local representative must be appointed to handle compliance formalities. Providers are also required to integrate their invoicing and payment systems with the tax authority’s reporting platform to ensure seamless data submission.

Practical example: SaaS provider entering the Indonesian market

A foreign SaaS company earns 700 million rupiah in subscription revenue from Indonesian customers in one year. Upon crossing the threshold, it must register as a VAT collector via the tax authority’s portal, obtain a tax identification number, and appoint a local representative.

Find Business Support

Dezan Shira & Associates helps foreign investors navigate Indonesia’s digital VAT rules, from registration to compliance. Contact us for expert guidance.

Each month, it submits a VAT return and remits the tax collected in either Rupiah or US dollars by the end of the following month.

Reporting and remittance timelines

VAT collectors must file monthly VAT returns and remit payments for the previous tax period by the end of the following month. Reports are submitted electronically through the designated platform. Foreign entities are permitted to remit VAT in either Indonesian Rupiah or US dollars, while domestic operators must remit in Rupiah.

Adhering to these timelines is critical to avoid administrative penalties and interest charges.

Obligations for marketplaces and intermediaries

Digital marketplaces that facilitate cross-border sales to Indonesian users are required to maintain detailed records of all vendor transactions and submit this data to the tax authorities.

In some cases, marketplaces themselves may be designated as VAT collectors, particularly when they act as the main intermediary between foreign vendors and local customers.

This ensures VAT is collected even when vendors have no direct tax presence in Indonesia.

Audit and compliance risks

The new system gives the Indonesian tax authorities broader visibility into digital transactions originating from abroad. Non-compliance, such as failure to register, delays in remittance, incomplete reporting, or not appointing a representative, can result in audits, back tax assessments, and financial penalties. The SPP-TDLN system’s enhanced data exchange capabilities make compliance oversight more stringent for foreign platforms.

Implementation timeline for full compliance

The SPP-TDLN system entered a sandbox phase in mid-2025 to allow technical integration and testing. Full mandatory compliance is expected to begin once the system is operationalized nationwide, which is anticipated within six to twelve months of the initial rollout.

Foreign providers meeting the thresholds should prepare now to avoid last-minute adjustments when the system transitions to full enforcement.

Strategic preparations and next steps

Investors should approach these changes as part of broader market entry planning. Forecasting future transaction volumes helps determine when VAT thresholds will be crossed and allows compliance structures to be built in advance.

Tax governance policies should be aligned across regional operations to ensure that Indonesian VAT reporting integrates smoothly with existing global processes. Early engagement with professional advisors can also reduce operational risk and ensure that digital services are structured in a tax-efficient way before full compliance enforcement begins.

• Previous Article Indonesia’s Construction Boom and Opportunity for Foreign Contractors
• Next Article How Foreign Investors Can Leverage Malaysia’s Free Trade Agreements