On March 29, 2019, The Indonesian Ministry of Finance (MoF) issued a new Regulation, No. 32/PMK.010/2019 (MoF-32), which expands the type of export services which are subject to 0% VAT rate. By issuing the MoF-32, the Indonesian government hopes to encourage the export of services and increase the competitiveness of the domestic service providers.
MoF-32 defines export services based on where the services is utilized/consumed. Having said that, services performed within the Indonesian Customs Area can be considered as an export if such services is utilized outside Indonesian Customs Area. Below are the list of services in which subject to 0% VAT rate based on MoF-32:
- Services related with movable goods utilized outside the Indonesian customs area, such as:
- Toll manufacturing
- Repair and maintenance
- Freight forwarding on export oriented goods
- Services related with immovable goods located outside Indonesian customs area in the form of consultation services for construction.
- Other services, whereby these services are benefitted/utilized outside the Indonesian customs area through either direct or indirect delivery (e.g. via postal service or electronic channels) or provision of access outside Indonesian customs area. Please find below the list of services falls under this provisions:
- Information and technology
- Research and development
- Rental of ships and/or airplanes for international shipping and flight
- Trading services in the form of seeking material supplier inside Indonesian customs area for the purpose of export
- Interconnection, satellites and/or data connectivity services
- Consultation services
To be able to take advantage of the 0% VAT rate, there are several requirements to be fulfilled:
- The export activities must be based on a written agreement between Indonesian VAT-able entrepreneur and overseas service recipients which explains the type of service, details of activities rendered and transaction amount
- Proof of payment by the overseas service recipients to the Indonesian VAT-able entrepreneur
Failure to meet the above requirements will cause the transaction to be deemed as a local delivery and will be subject to 10% VAT.
In addition to the above, the VAT-able entrepreneur is still required to prepare an export declaration of services (Pemberitahuan Ekspor Jasa/PEJ) along with the sales invoice.