12 Apr 2016
PROVISION OF OVER-THE-TOP APPLICATIONS AND/OR CONTENT SERVICE VIA THE INTERNET

On 31 March 2016, the Minister of Communications and Information Technology (“CIT”) issued Circular Letter Number 3 of 2016 concerning Provision of Over-The-Top Applications and/or Content Services via the Internet (“OTT Services”) (“Circular Letter”).

The Circular Letter begins with a general remark that the CIT Ministry is preparing a regulation regarding OTT Services (“OTT Services Regulation”) which will be in effect in the near future, and that the Circular Letter is issued as a form of socialization of the content of the upcoming regulation so that OTT service providers can sufficiently prepare themselves and be ready to comply with the regulation. As such, the provisions of the Circular Letter are not as yet valid and binding .

The following are some of the provisions of the Circular Letter:

• Definitions of OTT Services:
  “OTT Application Services via the Internet means the use of telecommunication services via an internet protocol based telecommunication network which enables the creation of communication services in the form of short messages, voice calls, video calls, online chatting, financial and commercial transactions, data storage and collection, games, social networking and media and their derivatives.“
  "OTT Content Services over the Internet means the provision of all forms of digital information consisting of writing, sound, images, animation, music, video, films, games or combination of part and/or all of the above including those which are streamed or downloaded, by using telecommunication services via an internet protocol-based telecommunication network.”

• The provision of OTT Services may be conducted by (i) an Indonesian citizen (individual), or (ii) an Indonesian business entity, whether a legal entity or a non-legal entity, or (iii) a foreign individual or a business entity (“Foreigner”). A Foreigner who wishes to provide OTT Services is required to establish a Permanent Establishment (Bentuk Usaha Tetap or “BUT”) in Indonesia in accordance with the prevailing Indonesian taxation laws and regulations¹.
• Obligations of OTT Service providers (among others):

1. Comply with the laws and regulations regarding prohibition against monopoly and unfair business practices;
2. Comply with the laws and regulations regarding trading, consumer protection, intellectual property, broadcasting, film, advertising, pornography, anti-terrorism, taxation, and other related laws and regulations;
3. Conduct data protection in accordance with the laws and regulations;
4. Conduct content filtering in accordance with the laws and regulations;
5. Use censorship mechanism in accordance with the laws and regulations;
6. Use a national payment gateway which is an Indonesian legal entity;
7. Use an Indonesian internet protocol number;
8. Guarantees access for lawful interception and collection of evidence for the purpose of criminal inquiries or investigation by the competent authority in accordance with the laws and regulations;
9. Provide information and/or service usage guide in Indonesian in accordance with the laws and regulations.

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¹According to Article 2 paragraph (5) of Law No. 7 of 1983 concerning Income Tax as amended several times, lastly with Law No. 36 of 2008, a Permanent Establishment is an establishment used by an individual who does not reside in Indonesia, an individual who has been present in Indonesia for not more than 183 (one hundred and eighty-three) days within the period of 12 (twelve) months, and an entity which is not established and is not domiciled in Indonesia for conducting business or carrying out activities in Indonesia which may include a place/domicile of management; a branch; a representative office; an (physical) office; a factory; a workshop; a warehouse; a space for promotion and selling; a mine and natural resources extraction; an oil and gas mining working area; fishery, animal husbandry, agriculture, plantation, or forestry; a construction, installation or assembly project; any kind of services in any forms provided by the employees or any other persons, to the extent that the services were done within more than 60 (sixty) days within a period of 12 (twelve) months; an individual or entity acting as a dependent agent; an agent or employee of insurance company which is not established and is not domiciled in Indonesia, receiving insurance premium or insuring risk in Indonesia; and computer, electronic agent or automatic equipment owned, rented, or used by any electronic transaction provider to conduct business over internet. A permanent establishment contains the concept of the existence of a place of business, namely facilities that may be in the form of lands and buildings, including machinery and equipment, warehouses and computers or electronic agent of automated equipment owned, rented or used by any electronic transaction provider to carry on business through internet. The place of business is permanent in nature and used to carry out the business or to conduct the activities of any individual not residing or any entity not established and domiciled In Indonesia.