Indonesia Updates VAT Collection for Digital Services

New VAT Collection Mechanism

Indonesia is strengthening its regulatory framework for non-resident digital service providers. 

On July 14, 2026, the Ministry of Finance enacted Regulation 49/2026 for the Collection of VAT on Cross-Border Digital Transactions through the Tax Collection System for Cross-Border Digital Transactions, which took effect on July 20, 2026. 

The adopted regulation establishes the framework for successful adoption of the new regime, under which designated parties and operators of IT systems are principally responsible for the successful implementation of the new regime for VAT collection on cross-border supplies of digital services/products.

The introduction of the additional tax compliance mechanism for proper VAT collection on the providers of cross-border digital transactions represents an additional push from the Indonesian Government to strengthen the VAT collection system for these transactions and to optimize tax compliance. 

Presidential Decree 68/2025 set the foundation for the introduction of this Tax Collection System, while the Ministry of Finance Regulation 49/2026 sets in motion the system, procedures, and structure upon which the new regime will be implemented. 

Indonesia VAT on Digital Services 

Under the newly introduced VAT collection system on cross-border digital transactions, Indonesia is introducing, in a nutshell, the VAT withholding/collection system, which is going to be operated through designated payment services providers and banks that will be accountable for proper VAT collection, reporting, and remittance on behalf of the service providers who aren’t VAT registered or who haven’t reported tax but should have. 

The introduction of this VAT collection mandate is an additional regime that will complement the already operational tax compliance regime for non-resident digital service providers. Indonesia introduced a specifically designated VAT collection regime for cross-border providers of digital services/digital products more than 6 years ago. 

Under the new regime, designated banks/payment service providers will be delegated to collect and report tax on behalf of the non-registered digital service providers/platforms, both domestic and foreign. 

The principal goal is to improve VAT collection on cross-border digital transactions and reduce the tax revenue on missed collection for these transactions. 

The non-resident digital service providers that are in the scope of the Indonesia VAT regime for cross-border supplies of digital services or intangible products should: 

1. Control who is responsible for VAT collection on their transactions 
2. Register for Indonesia VAT for the provision of digital services via the simplified registration regime
3. Control whether they are registered ex officio but don’t comply with the regime 
4. To avoid double taxation, get in touch with the lists of the cross-border providers of digital services that are included in the lists of the VAT withholding agents(payment service providers)