The digital economy has made cross-border transactions increasingly accessible. Consumers in Indonesia can purchase software, cloud computing services, digital advertising, games, and artificial intelligence-based services from overseas providers without a physical presence in Indonesia.
This type of transaction creates challenges for tax administration. When a digital provider is based overseas, tax authorities cannot always collect VAT using the same procedures as with domestic providers.
Indonesia previously addressed this issue through the electronic trading system (perdagangan melalui sistem elektronik/PMSE) regime. Under this scheme, qualifying overseas digital providers are appointed as VAT collectors. However, some transactions remain outside the scope, as the relevant providers have not been appointed as VAT collectors.
To cover these transactions, the government introduced the foreign digital transaction tax collection system (sistem pemungutan pajak atas transaksi digital luar negeri/SPP-TDLN). The system took effect on September 25, 2026, under Announcement Number PENG-6/PJ/2026 and Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 49 of 2026.
SPP-TDLN does not introduce a new type of tax or a new VAT rate. Instead, it provides an administrative procedure for collecting VAT on the use of intangible taxable goods and taxable services from outside the customs territory within the customs territory.
Collection Shift
The main change is where VAT is collected. Under the PMSE regime, the overseas digital provider collects VAT. Under SPP-TDLN, domestic payment institutions become part of the collection process.
This scheme allows users in Indonesia to pay overseas digital providers using credit cards, debit cards, or other domestic payment instruments. Banks or other parties then send the transaction data to the SPP-TDLN operator, specifically PT Jalin Pembayaran Nusantara.
The system then matches the transaction information against DGT data. One factor considered is whether the digital provider is already registered as a PMSE VAT collector.
If the provider is not registered as a PMSE VAT collector and the transaction meets VAT criteria, the system confirms to the relevant party that VAT should be collected.
For transactions in foreign currencies, the transaction value is converted into rupiah using the exchange rate stipulated by the Minister of Finance. VAT is collected using a formula of 11/111 of the price or amount paid.
Accordingly, banks do not determine on their own whether a transaction is subject to VAT. They collect VAT based on the identification and confirmation provided through the SPP-TDLN system.
After collecting the VAT, banks remit the accumulated amount to the SPP-TDLN operator. The operator then deposits the funds into the state treasury and reports them in the monthly VAT return in aggregate.
Digital Loophole
PMSE VAT revenue shows that digital transactions play a pivotal role in Indonesia’s tax base. PMSE VAT revenue reached IDR 8.44 trillion in 2024 and increased to IDR 10.32 trillion in 2025. By the first half of 2026, revenue had reached IDR 6.34 trillion.
As of the end of August 2026, cumulative PMSE VAT revenue since its rollout in 2020 had reached IDR 44.05 trillion from 244 active VAT collectors. These figures indicate that the PMSE has reached numerous large-scale digital platforms. However, digital transactions are not limited to large companies.
Providers with smaller individual transaction values still exist, including subscription-based software, in-game purchases, cloud computing services, and various emerging digital services.
This is where SPP-TDLN comes in. The system is designed to cover transactions outside the PMSE collection by using payment infrastructure that consumers already rely on.
The DGT projects that SPP-TDLN could generate an additional IDR 3 trillion in VAT revenue between September and December 2026.
Impact on Businesses
For businesses, changes in VAT collection are beyond the payment process. One noteworthy consideration is the VAT credit collected through SPP-TDLN.
Before SPP-TDLN was introduced, domestic companies using digital services from overseas providers that were not PMSE VAT collectors had to calculate, pay, and report the VAT themselves on the use of taxable services from outside the customs territory.
Under SPP-TDLN, banks or other parties collect VAT. Although banks do not issue tax invoices, they issue documents treated as tax invoices, such as bill statements, account statements, or billing documents.
Businesses may use these documents to claim input VAT as a credit, provided they meet the applicable requirements. At least six items of information must be included, including the identity of the other party, the identity of the overseas digital provider, the identity of the recipient of the goods or services, the VAT collection date, the transaction reference number, and the tax base and VAT amount collected.
The substantive requirements still apply. The transaction must relate to the PKP’s business activities, and the VAT collected must not be treated as an expense or capitalized for income tax purposes. Companies therefore need to keep proper records of each digital transaction.
Coretax Challenges
SPP-TDLN rollout also intersects with the use of Coretax. Banks report transactions to the operator in aggregate, while companies need to identify individual transactions when claiming input VAT credits. This difference makes reconciliation important.
Companies paying for software subscriptions, cloud computing, digital advertising, or other digital services using corporate credit cards must ensure that these transactions are traceable to the relevant VAT collection documents. They should match credit card statements, bill statements, transaction reference numbers, and VAT amounts against accounting records and monthly VAT returns.
If the documents do not meet the formal requirements, the company’s ability to claim the input VAT credit may be affected. SPP-TDLN requires companies to adjust their internal accounting and tax procedures accordingly.
Incorrect Collection Risks
SPP-TDLN also poses accuracy challenges. Even though payment institutions retain transaction information, they may not always know the payment’s underlying economic nature. For instance, a foreign-currency transaction could involve a software license, a personal remittance, or payment for imported goods.
These transactions have different tax treatments. Merchant category codes (MCCs) can help identify transactions, but they do not always fully reflect their underlying nature. As a result, transactions that are not subject to VAT could be incorrectly identified as taxable, or vice versa.
Incorrect identification can result in VAT being collected in error and may ultimately require a correction or refund. Another issue is the risk of double collection. SPP-TDLN operates alongside the PMSE regime. If a provider has already collected VAT as a PMSE VAT collector, the transaction should not be subject to VAT through SPP-TDLN.
Thus, data sharing among the DGT, PT Jalin, banks, and PMSE VAT collectors will be vital to prevent double collection.
Refund Procedures
VAT refund procedures for incorrect collection are crucial, particularly for small-value transactions. PMK Number 49 of 2026 governs VAT correction and refund. Taxpayers may submit applications through the issuer or bank, which then processes them according to the prescribed procedures.
Proportionality is one issue that arises. When the amount of VAT incorrectly collected is relatively small, a multi-step refund process may discourage consumers from submitting claims. The effectiveness of the refund procedure depends not only on the availability of a legal right to a refund, but also on how simple the process is.
A simple, and where possible automated, refund process could reduce the administrative burden for consumers, banks, and tax authorities.
Policy Direction
SPP-TDLN expands VAT collection scope by leveraging existing payment infrastructure. This approach could reduce differences in VAT treatment between domestic digital providers and overseas providers that were previously outside the PMSE collection framework.
Nevertheless, expanding the collection base needs to go hand in hand with greater system accuracy. Several areas will be essential going forward. First, the screening system should use a wider range of data rather than relying on a single indicator such as the MCC.
Second, the refund process should be kept simple for cases of incorrect collection, particularly for small-value transactions. Third, data integration between the DGT, PT Jalin, payment institutions, and PMSE VAT collectors must be well maintained to prevent double collection.
For businesses, the main focus is on input VAT administration. Transaction documents must meet applicable requirements and reconcile with the company’s accounting records and monthly VAT returns through Coretax.
SPP-TDLN changes how cross-border digital transactions collect VAT and document it. Its success will depend on accurate transaction identification, data integration, and a straightforward process for correcting collection errors.
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Editor: Thomas Rizal