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Tax Challenge of Digital Economy - STAN Presentation 140721
Tax Challenge of Digital Economy - STAN Presentation 140721
2
What is Digital Economy?
3
International
tax planning
in digital age
No physical presence in the market country
Country A
Indonesia
Tax Implication:
Company A’s revenue will not be taxed at all in
Indonesia, despite the fact, that the revenue
derives from Indonesia.
5
Provision of services in market country
B is a service provider Company who performs
support service to Company A’s to accommodate
customer need in Indonesia
Country A
Indonesia
Support services
Tax Implication:
Indonesia can only tax limited to the service
income of Company B without taxing sales
generated by Company A from Indonesia
6
Establish a limited risk entity in the market
country (e.g. Limited risk distributor)
B is a limited risk distributor entity in Indonesia
who performs as an intermediary between
Company A and Indonesian customer
Country A
Indonesia
B
Customers
Tax Implication:
Indonesia can only tax limited to the income
generated by B (low margin as LRD)
7
PRELIMINARY CONCLUSIONS
8
Global Tax Trends of Digital Economy
Non-Turnover Based
01
25% / 40% 6% / 5% / 10%
2015 (/18), 2016 2016, 2019, TBC
United Kingdom, Australia India, Pakistan, Chile
02
28% / TBC
2019, TBC 2016, 2017, 2018, 2019
Italy, Korea Russia, Israel, Saudi, Canada…
03
20% / CT rates
2017, 2018, 2019 2019, 2020
United Kingdom, Hong Kong, Taiwan France, Italy, UK, Spain, Czech Republic, Poland
04
CT Rates 3% / 5%
Rate 2019 In force, 2020
Effective from India Hungary, Austria
Countries
9
Pillar one
The
implementation Sales: $600
of pillar one
Profit: $9
Before pillar 1
After pillar 1
Technical
20% over 10% rule
Possibility that Indonesia will left with nothing or small portion
of amount A, if the consolidated profit is less than 10% (i.e
Amazon)
Certainty
Indonesia tax authority may surrender a degree of freedom to
make adjustment in return for which they are allocated an
incremental formulaic Amount A
Potential impact from
Indonesia perspective Possibility of double counting
There is possibility that Indonesia would tax twice the same
item of profit if they were allocated Amount A on top of certain
existing withholding tax liabilities (i.e royalty)
Complexity of amount A
The complexity could potentially hamper the sustainability of an
eventual consensus
Potential impact from
Indonesia perspective The need of additional documentation to report the revenue
of the group
Currently, Indonesia implement three-tiered documentation,
including CbCR. Nevertheless, none of the documentation
required disclosure of group revenue from each jurisdictions,
regardless the digital presence
1) UN solutions (insertion of article 12B)
14
Pillar two
Before Pillar 2 Pillar 2 Proposal
After Pillar 2
Top-up Taxes under IIR: $6.03 paid
by RCo