Netflix given 1 month to get legal and pay taxes in Indonesia

Image by Brian Cantoni

Indonesia’s tech ministry threw down the gauntlet earlier this week, saying Netflix has one month to comply with the nation’s regulation on film and broadcasting, reports local media portal Kompas. It comes after Netflix launched in Indonesia – alongside 129 other new markets – on January 7.

The country’s tech minister, Rudiantara, said earlier this month that he would probably not ban Netflix. Instead, he hopes the US-based company will work with internet service providers and get itself a business license as a local content provider. He also says Netflix needs an official business entity in Indonesia if it wants to operate legally.

Netflix needs to apply for a license known as a BUT (Badan Usaha Tetap). Essentially, this means the firm must open an office in Jakarta, hire local employees, and subject itself to tax regulations, which indeed means that with every transaction on Netflix in Indonesia, a portion will go back to the government. The real question tech junkies are sure to be asking themselves is: does Netflix care enough about Indonesia to jump through these hoops?

See: Sidestepping the tax axe: should foreign startups in Indonesia be taking cues from Uber?

Rich ones only, please

Kompas says the few tech companies that actually get popped by the government in Indonesia are deep pocketed players like Google, Facebook, and Uber. Businesses are made to pay corporate income tax and value added tax.

Indonesians can purchase a basic subscription to Netflix for around US$8 per month.

The BUT license applies to big content providers like Netflix. However, many foreign companies – assuming they care about being legal – will be looking at a PT PMA, which is a foreign investment limited liability company. Market entry services firm Indosight recently said the minimum capital requirement to set up a PT PMA was IDR 10 billion (roughly US$1 million). Market entry consulting firm Cekindo confirms this. The amount needs to be part of a company’s official investment plan with a quarter of it paid up front into the company’s Indonesian bank account.

Uber recently experienced this same debacle in Jakarta. However, the global ride-hailing service wipes with hundred dollar bills. So really, it was more like an annoying parking ticket for Uber.

Experts say tax compliance is incredibly low in Indonesia. There are more than 60 million locals who should pay personal income tax. However, only 40 percent of them actually do, says Fuad Rahmany, former director general of taxes at the Indonesian finance ministry. Rahmany estimates only 11 percent of all companies active in the country pay their corporate taxes.

Image via Indosight

Sorry Indonesia, we’re just not sure you’ll spend that money on milk