Social networking giant Facebook Inc has received an in-principle approval to set up a domestic unit in Indonesia, home to the fourth-largest user base of Facebook.
Indonesia has been pushing multinational technology firms to be locally incorporated to prevent them from avoiding tax.
Indonesia complained foreign internet companies operate small business units to provide “auxiliary” services to get away with paying minimal tax, while booking the majority of their revenue from the country through a regional division.
Indonesia, with a population of 263 million, had 88 million monthly active Facebook users in June 2016, according to Internet World Stats. It increased from only 69 million monthly active Facebook users as of the first quarter of 2014, placing the country fourth globally after the United States, India and Brazil, according to data from the company.
Facebook did not respond to requests for comment and has not provided an update on the number of its users in Indonesia.
The office that Facebook opened in Indonesia three years ago allows it to work with advertisers as well as small and medium businesses "that need an education on how to market their products", a Facebook executive told local media at the time.
Indonesia is eager to ramp up tax collection to narrow its budget deficit and fund an ambitious infrastructure programme. Other governments around the world are also seeking to clamp down on what they see as corporate tax avoidance.
"I see good intention and spirit from Facebook," said Thomas Lembong, chairman of Indonesia's investment coordinating board to The Jakarta Post. "What we care about are taxes and responsible content."
The investment board and the communications ministry are currently looking at the type of business unit that Facebook will establish, Lembong said.
There are several ways to be locally incorporated in the country, including setting up a limited liability company, locally known as a PT (Perseroan Terbatas).
