This is the most comprehensive guide to VAT tax in Indonesia.
Indonesian companies are subjected to VAT rates based on the types of goods or services they provide, and companies must be registered for VAT so it can charge and claim VAT refunds.
Find out more about VAT tax in Indonesia below.
What is VAT tax in Indonesia?
Value-Added Tax (VAT) is the tax imposed on most products and services in Indonesia. It is the consumption tax applied to each of the production stages up until the final stage, which is selling the product.
VAT rates in Indonesia
The VAT rates in Indonesia are as follows:
|General VAT rate (this rate can be amended to 5% at the lowest or 15% at the highest, which will be regulated under the Government Regulation.)||10%|
|Export of taxable intangible and tangible goods||0%|
|Export of certain taxable services, such as toll manufacturing, repair and maintenance services related to moveable goods and construction service involving immovable goods||0%|
Products and services not subjected to VAT
Products that are considered as non-taxable goods include:
- Products from drilling or mining that are extracted from the source, such as natural gas, crude oil, coal, geothermal energy, gravel and sand, iron ore, copper ore, gold ore, silver ore, limestone, gemstone, phosphate, clay and coal
- Food and drink served in hotels and restaurants
- Basic commodities such as salt, rice, soybeans, corn, sago, fresh meat, packaged or unpackaged meat, eggs, milk, fruit, vegetables, tubers, ingredients and sugar
Non-taxable services include:
- Medical and health services
- Mail services
- Social services such as funerals
- Religious services
- Insurance services
- Art and entertainment services
- Educational services
- Public transportation services
- Hotel services
- Workforce services
- Food and catering services
- Public telephone services
- Broadcasting services that are not related to advertising
- Financial services
- Labour services
- Parking provision services
- Public telephone services using coins
- Money transfer services using a postal money order
Free trade zones in Indonesia
Batam Island, Bintan Island and Karimun Island are Free Trade Zones in Indonesia. Companies in the Free Trade Zone are not required to register as a VAT-able entrepreneur.
Delivery of taxable goods and importing of goods into a Free Trade Zone is exempted from VAT. The delivery of intangible taxable goods or taxable services in a Free Trade Zone are also not subjected to VAT.
VAT registration procedure
Businesses are required to register for VAT purposes once it has an annual revenue of IDR 4.8 billion.
Businesses with revenue less than IDR 4.8 billion can voluntarily registered for VAT. There are three steps of registering as a VAT-liable company.
Step 1: Application submission
First, you need to complete the application form and attach it with the required company documents, including the Tax Registration Number (NPWP) of the director.
Step 2: Field verification
Once the application is submitted, tax officers will visit your company. The field verification is conducted in order to check whether the provided information is valid or not.
Step 3: Approval
After the field verification, the decision will be made after five working days. You will get an access code that can be used for the online VAT system if you are approved as a VAT-able entrepreneur. When you get the code, the company’s director must visit the tax office to get the login ID and password.
When to claim VAT refunds?
VAT refunds can be claimed at the end of the financial year.
VAT refund approval
The decision of VAT refund is done by the Directorate General of Taxes (DGT) and results in a tax audit being carried out within 12 months of the VAT refund application.
VAT refund applications can also be approved if the DGT has not made any decisions within the 12-month time frame. Companies must then submit the required documents to the DGT within a month after the application.
Monthly refunds are possible for certain taxpayers (exporters of goods or services, suppliers to VAT collectors. Companies in the pre-production stage and supplier of goods or services for which VAT is not collected, if they meet certain criteria).
VAT-able entrepreneurs (Pengusaha Kena Pajak – PKP) have to report their VAT and business activities on a monthly basis. The monthly VAT return must be submitted by the end of the following month at the latest, and any VAT payable must be settled prior to the submission. Penalties for late returns and payment are a fine of IDR 500,000 and 2% per month from the VAT due, respectively.
VAT-able entrepreneurs with branches must register the branches with the tax service office (Kantor Pelayanan Pajak – KPP). However, the VAT-able entrepreneur may centralise its VAT reporting by submitting a written notification to the DGT.
What is included in the VAT invoice?
VAT invoices in Indonesia must have the following information:
- Unique VAT invoice number provided by the tax authority
- Name, tax identification number (TIN) and address of the seller
- Name and address of the customer and their TIN
- Date of the invoice
- Clear description of the taxable supplies, including quantities, unit prices, etc.
- Net, VAT and gross amounts
- Foreign currency invoices should include rates used based on the Ministry of Finance’s published rates
If you fail to issue an invoice compliant with the above information in a timely manner, it may lead to a fine of 2% from the tax base. Invoices must be maintained for at least ten years.
Some imports and purchases are exempted from VAT through incentives that are provided by the government. The imports and purchases include:
- Strategic goods, such as machinery and factory equipment
- Raw materials for processing by companies in a Bonded Zone
- Imports and delivery of services, equipment and other supplies required to perform a project financed by foreign aid
- Imports and purchases made by companies in certain industries such as national shipping or airline companies
- Delivery and/or import of taxable goods into a Free Trade Zone
The VAT rate in Indonesia is currently at 10%, and it provides diverse exemptions and incentives to VAT-able entrepreneurs. You should be aware that you are correctly paying and filing you VAT as there are fines for late payments and late filings.
Get in touch with Acclime and let us take care of your tax obligations.
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