Using an Electronic Wallet Can Be Subject to VAT, What Are the Provisions?

Question:
Let me introduce myself, I’m Linda, a professional in the field of providing e-wallet services. The electronic wallet can be used as a means of payment. My question is, must VAT be collected in the provision of these services?

Answer:
Thank you, Mrs. Linda, for your question. To answer this question, we can refer to the Minister of Finance Regulation Number 69 of 2022 (MoF Reg. 69/2022).

Under Article 1 of MoF Reg. 69/2022, electronic wallets are defined as follows:

“Electronic Wallet is the provision of electronic services to store data on payment instruments which may be in the form of Card-Based Payment Instruments and/or Electronic Money, which can accommodate funds, to perform payments.”

Further, we can understand that in Article 6 paragraph (3) of MoF Reg. 69/2022, electronic wallets are included in the scope of payment services referred to in the regulation.

Assuming that your area of services falls within the above definition and scope, we can refer to Article 8 paragraph (2) subparagraph b that e-wallet services are included in taxable services.

As such, what types of activities are included in the definition of e-wallet services? The scope is regulated under Article 7 paragraph (2) of MoF Reg. 69/2022 which includes:

1. top up;
2. cash withdrawals through other parties that cooperate with electronic wallet providers or use other parties’ delivery channels
3. payments of transactions;
4. bill payments;
5. fund transfers; and
6. paylater services.

It should be noted that the money deposited into the electronic wallet is not subject to VAT. This is as stipulated in Article 8 of MoF Reg. 69/2022 as follows:

“Money in Electronic Money or Electronic Wallet media, including bonus points, top up points, reward points and loyalty points, constitute goods that are not subject to Value Added Tax.”

Thus, how is the Value Added Tax Base of services constituting VAT objects determined? We can refer to the determination of the Tax Base in Article 9 paragraph (3) of MoF Reg. 69/2022 as follows:

“Tax Base referred to in paragraph (2) is in the form of Consideration, amounting to the fees, commissions, merchant discount rates or other remunerations in whatever name and form received by the provider.”

Thus, the VAT Base is determined from the payments of consumers or users of the electronic wallet received by the company providing the e-wallet services.

We hope our answer satisfies your inquiries.

On a side note, the Harmonisation of Tax Regulations Law Consultation article is presented every Tuesday to answer questions related to the Harmonisation of Tax Regulations Law and the derivative regulations thereto submitted to the following email address, [email protected]. Feel free to email any questions to the aforementioned email address. (kaw)