Income Tax of Royalties and VAT Treatment of the Film Import

Director General of Taxes Circular No.SE-3/PJ/2011 asserted that the film import is income tax and VAT payable.

1.      Income Tax

a.       On income paid to foreign taxpayers in addition to a permanent establishment in Indonesia in connection with the use of copyrights to foreign movies with certain requirements such income paid abroad are included in the royalty terms of Article 26 Income tax withheld by the party required to pay registration 20% of the gross amount or according to tariffs as stipulated in the Avoidance of Double Taxation Agreement between Indonesia and partner countries;

b.      But if on income paid in connection with the purchase of imported films are:

                i.      all copyrights (including rights of distribution in other countries) have been moved without certain conditions, including without any obligation of compensation payments in the future; or

                ii.      granted the right to use copyright without the right to announce and / or reproduce the creations, such income paid abroad are not included in the royalty terms of Article 26 Income tax withheld

2.      VAT

a.       Importation of foreign movies is an activity of the utilization of intangible Taxable Goods, containing results of a cinematographic work which is the intellectual property rights that are stored in the form of roll film media or other storage media, from outside the Customs Area within the Customs Area are subject to Value Added Tax

b.      Imposition of Tax Basis used to calculate Value Added Tax is payable at the amount of money paid or payable should

c.       It should be noted that at the time of entry for foreign movies have Value Added Tax levied on imports. Therefore, imposition of taxes that are used to calculate Value Added Tax payable on the use of imported films, which has accrued at the time of the film\'s revenues amounted to the value in money paid or should have paid, less the value of imports

d.      As for the payment of royalties as a result of the circulation of imported films movies in the Customs Area of Value Added Tax payable by tax basis for the imposition of value in money paid or should be paid,.

e.       Value Added Tax payable on the utilization of intangible Taxable Goods must be collected and remitted entirely to the State Treasury through the Post Office or Bank Perception using the Tax Payment by the individual or entity utilizing intangible Taxable Goods from outside the Customs, the longest 15th of the month following the current tax payable;