VAT on the delivery of prepaid phone credits and vouchers.

Due to the recurring disputes on the VAT imposition on the delivery of prepaid phone credits and vouchers, the Minister of Finance (MoF) has issued MoF Regulation No. 6/PMK 03/2021 on Jan 22, 2021 which regulates further the imposition of VAT and income tax on the sales of prepaid phone credits, starter packs for prepaid mobile SIM card, prepaid electricity tokens and vouchers. Below are some of the key take-outs from the regulation:

Delivery of prepaid phone credits and starter packs for prepaid mobile SIM cards

Delivery of prepaid phone credits and starter packs for prepaid mobile SIM card either in physical or electronic vouchers by the telecommunication service provider and distributors are subject to VAT of 10% from the sales price. VAT is imposed on the delivery activities performed by:

  1. Telecommunication service providers to the first-level distributors and/or telecommunications subscribers
  2. First-level distributors to the second-level distributors and/or telecommunication subscribers
  3. Second-level distributors to the telecommunication subscribers through the next level distribution operators or directly to the telecommunication subscribers
  4. Next level distributors

For delivery activities as referred to on No. 3 and 4, the VAT will be collected by the second-level distributors.

The VAT becomes payable when the payment is received (including any deposit received). A tax invoice must be issued by the telecommunication service provider and the distributors if they have been registered as VAT-able entrepreneur (Pengusaha Kena Pajak/PKP). Further, payment receipts issued by distributors is treated similar to a tax invoice (subject to fulfilling the formal requirements, consisting buyer’s name and tax ID or resident ID number/NIK).

VAT input tax invoice (subject to fulfilling the tax invoice requirements) on phone credits and starter packs for prepaid mobile SIM cards can be used as tax credit only by the telecommunication service provider, first-level distributors, and second-level distributors. The VAT input cannot be used as tax credit by the next level distributors and telecommunication subscribers.

From an income tax perspective, the second-level distributor will collect the Art. 22 income tax of 0.5% on the delivery of prepaid phone credits and starter packs for prepaid mobile SIM card from the next level distribution operators and/or to the telecommunication subscribers. If the buyer does not have a tax ID, the tax rate will be 100% higher than the normal rate (i.e. 1%). This Art. 22 income tax is not a final tax in nature, therefore the tax collected can be used by the buyer as tax credit when calculating the annual income tax.

The above collection of Art. 22 income tax of 0.5% will not be imposed if:

  1. The payment does not exceed IDR 2 million excluding VAT and not a divided payment on a single transaction in which in total is more than IDR 2 million
  1. The purchaser is a bank
  2. The purchaser has provided a statement letter which proves that the purchaser is subject to GR 23 final tax regime which has been confirmed by the Director General of Tax (DGT)

Delivery of prepaid electricity tokens

The delivery of prepaid electricity tokens by the electricity service provider (i.e. Perusahaan Listrik Negara/PLN) or the distributor is exempted from VAT as electricity is categorised as strategic goods. However, the distribution service which is charged on top of the token amount is subject to VAT of 10%. VAT input paid in relation with this transaction can be used as tax credit if the tax invoice received fulfils the tax invoice requirement based on the VAT regulations.

From an income tax perspective, the distribution service of the prepaid electricity token is subject to Art. 23 WHT at a rate of 2% of the service amount portion only and excludes VAT. If the distributor does not have a tax ID, the applicable tax rate will be 100% higher.

Delivery of vouchers

Delivery of vouchers (including daily deals vouchers, gift vouchers, application vouchers and online gaming vouchers) is not subject to VAT since vouchers are a payment intermediary/method which is similar with cash. However, delivery of the below services is subject to VAT of 10% from the tax base:

  1. Payment processing services in relation to the token distribution by distributors
  2. Marketing services using vouchers as the media by the voucher issuer
  3. Payment processing services in relation to the voucher distribution by  the voucher issuer and distributor
  4. Consumer loyalty/reward program services organised the by voucher issuer

The tax base for delivery on the above services is:

  1. The commission amount received if it is commission based
  2. The margin from the voucher sales and purchase amount if it is not commission based
  3. 10% from the amount billed or should be billed in the case where the delivery is not commission based and without any margin

The VAT input paid on the above service delivery can be used as tax credit except if the tax base is based on point (c) above.

This regulation has come into effect on Feb 1, 2021.

Should you have any queries or need any assistance in regards with the above, please feel free to contact us.

VAT on the delivery of prepaid phone credits and vouchers
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