The Government issued Regulation of the Minister of Finance No. 69/PMK.03/2022 (PMK 69/2022) regarding Income Tax and Value Added Tax on the Implementation of Financial Technology.
The main points regulated in PMK 69/2022 are the followings:
- Coverage of Financial Technology and Digital Financial Innovation
- Treatment of Value Added Tax (“VAT”) on Financial Technology (“Fintech”);
The type of financial services that are exempt from the imposition of VAT is limited to the services regulated in Article 16B VAT Law.
Criteria for the financial services exempt from the imposition of VAT are followings:
- fundraising services;
- services related to placement, lending and borrowing funds,
- financing services,
- loan distribution services based on pawns legal basis;
- collateral services.
- Vat principle on Fintech -> Equal between digital & conventional transactions.
- There areno new tax objects in the digital economy, the difference is only the way of transaction.
- VAT is only charged on the provision of platforms,facilities, and/or systems.
- Financial Technology entrepreneurs who have been registered as Taxable Enterprises are obliged to collect, pay, and report the VATpayable on the delivery of Taxable Services
- Treatment of Income Tax on Income in the Form of Loan Interest in the Implementation of Lending Services
Type of Income
- Loan Interest received by the Lender.
- Subject to Income Tax Art. 23 at 15% -> recipients are domestic taxpayers.
- Subject to Income Tax Art. 26 at 20% or based on tax treaty -> for foreign taxpayers.
– Lending services (P2P Platform) shall be appointed to withhold the Income Tax if they are already have a license and/or registered with the Financial Services Authority (OJK). If the lending services are not registered in OJK, the withholding of income tax shall be conducted by borrowers.
- Income on the form of fees, commissions, ujrah or other honorariums in any names and in any forms from borrowers and/or lenders related to the implementation of Lending Services received by P2P Platform.
- If the P2P Platform is registered with the OJK -> not the object of WHT.
- P2P Platform not registered -> withheld by borrower or lender.
The income in the form of loan interest and fees for services shall be reported as income in the Annual Income Tax Return of each income recipient.
This regulation shall come into force on May 1, 2022.
SS – 2022 – PMK No.69.PMK.03.2022