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Google, Amazon, Netflix to be hit by Indonesia's proposed tax overhaul

Indonesia's Finance Minister Sri Mulyani Indrawati said the government is preparing a bill that will make tech giants pay value added tax in the country, Reuters reported.

Companies with significant economic presence such as Alphabet Inc.'s Google LLC, Amazon.com Inc. and Netflix Inc. will be considered a "permanent establishment" liable to pay VAT in Indonesia, regardless of whether they have a physical office in the country or not, Indrawati said. The VAT rate in Indonesia is currently 10%.

The bill, which needs parliamentary approval, is part of broader tax reforms in the Southeast Asian country. It is intended to improve revenue collection, increase compliance and attract investment.

A corporate tax cut will also be reportedly part of the bill. Under the proposed law, corporate tax rate would be reduced to 20% from 25% starting 2021, while the tax rate for companies with public share ownership of at least 40% would be lowered to 17% from the current 20%.

There is also a proposed measure to eliminate income tax on dividends from onshore or offshore investments if the money is reinvested within the country, according to Indrawati.