Indonesia: New VAT collection procedures for cross-border digital transactions

The Indonesian Ministry of Finance on July 14, 2026, enacted Minister of Finance Regulation Number 49 of Year 2026 (PMK-49) on the new VAT collection procedures for cross-border digital transactions (SPP-TDLN), effective September 25, 2026.

Entities in scope

• Foreign providers of digital goods and digital services that have not been appointed as electronic system-based trading (Perdagangan Melalui Sistem Elektronik, or PMSE) VAT collectors under the existing regime.
• Payment institutions (banks or non-bank payment service providers, including card issuers and payment gateways) appointed by the Directorate General of Taxes (DGT) as “other parties” to collect, remit, and report the VAT due.
• The tax collection system operator, PT Jalin Pembayaran Nusantara (“Jalin”), a state-owned entity in the financial technology and payment systems sector, designated under Presidential Regulation Number 68 of Year 2025 to administer the system.

Transactions covered – scope is limited to digital goods and services, not general goods or services

• Intangible taxable goods in digital form (“digital goods”) – defined as software, multimedia, and/or electronic data, whether resulting from conversion/transformation or originally electronic.
• Taxable services in digital form (“digital services”) – services delivered via internet or electronic network that are automated or involve minimal human intervention and could not be provided without information technology (at minimum, software-based/software-as-a-service offerings).
• The DGT has confirmed in its official FAQs that: (1) SPP-TDLN does not introduce a new VAT object or increase the VAT rate; (2) incoming international fund transfers are not, by themselves, a VAT object; and (3) remittances by migrant workers are explicitly excluded.
• Explicitly excluded are transactions when VAT is already collected by a business appointed as a PMSE VAT collector under the existing regime. The two mechanisms operate side by side to avoid double collection.

Collection mechanism – how withholding is determined

• The foreign merchant or service provider must include Indonesian VAT in the price payable by the Indonesian customer, as under the existing regime.
• At the time of payment authorization, the payment institution processing the customer’s payment submits the transaction data to Jalin.
• Jalin cross-checks the merchant/transaction against the DGT’s registry of appointed PMSE VAT collectors and confirms, within one business day, whether the transaction is subject to VAT collection under SPP-TDLN:
  • If the foreign merchant is already an appointed PMSE VAT collector, Jalin confirms that no withholding is required under SPP-TDLN (the merchant continues to self-collect and remit as before), preventing double taxation.
  • If the foreign merchant is not an appointed collector, and the transaction is identified as relating to a digital good or digital service, Jalin confirms that withholding is required, and the payment institution withholds the VAT portion (calculated as 11/111 of the price or payment amount) before transferring the net proceeds to the foreign merchant.
• According to the DGT’s own FAQ, identification of in-scope transactions relies not only on the cross-border transaction data itself, but also on domestic fund-transfer and remittance data, which the DGT uses for “mapping and analysis” to determine which transactions constitute a VAT object under SPP-TDLN. The DGT has stated this data use is limited to VAT-object determination and is not intended to monitor individual bank accounts generally.
• The payment institution remits the collected VAT to Jalin, which in turn remits it to the State Treasury and files consolidated VAT returns.
• Billing statements or invoices issued by payment institutions are recognized as documents equivalent to Tax Invoices. Indonesian corporate buyers registered as VAT-able entrepreneurs (Pengusaha Kena Pajak, PKP) may credit the input VAT, provided their registered corporate email address or telephone number matches the DGT’s records.

Registration/appointment

• Payment institutions may only be appointed as “other parties” after the development and stabilization (“sandboxing”) period of SPP-TDLN concludes.
• The initial rollout reportedly involves five banks and one financial technology (“fintech”) company, with other institutions expected to be added in stages.
• Based on the DGT press release dated October 1, 2026, the six issuers initially appointed are PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Mandiri (Persero) Tbk, PT Bank Negara Indonesia (Persero) Tbk, PT Bank Tabungan Negara (Persero) Tbk, PT Bank Syariah Indonesia Tbk, and PT Fintek Karya Nusantara (LinkAja). Other issuers are currently undergoing testing in the sandbox environment and are expected to enter the stabilization phase shortly, after which they may be officially designated as VAT collectors.

KPMG observation

For non-Indonesian businesses selling digital goods or services to Indonesian customers, this development is largely administrative rather than substantive. It does not create a new tax or change the VAT rate, and it does not, by itself, require the foreign business to register in Indonesia. However, it has practical cash flow and reconciliation implications: foreign merchants that have not been appointed as PMSE VAT collectors may see the amounts they receive from Indonesian customers reduced, as VAT is now withheld automatically by the payment institution before funds are transferred, rather than the foreign business self-collecting and remitting.

Affected businesses need to reconcile payment remittance reports against invoiced amounts to confirm that the correct 11/111 withholding is being applied, review payment processor and acquiring bank agreements for updated remittance and reporting terms and confirm whether they wish to pursue formal appointment as a PMSE VAT collector (which would keep collection in their own hands rather than the payment institution’s). Businesses also need to monitor whether the new mechanism captures business-to-business sales to Indonesian corporate customers in the same way as business-to-consumer sales, given the potential for corporate customers to credit the input VAT via the payment institution’s billing documents. Finally, because payment rails generally do not carry line-item detail on the nature of a transaction, there is a practical risk of misclassification (either under- or over-withholding) until the merchant/transaction identification methodology used by Jalin and the payment institutions is more fully understood and tested.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Susanto | Susanto2@kpmg.co.id