Highlights of Indonesian government regulation GR-44/2022 regarding VAT and LST.
In relation to the VAT and LST provisions as stipulated under Law No. 7/2021 regarding Harmonization of Tax Regulations (UU HPP), the Indonesian government has issued Government Regulation No. 44/2022 (GR-44) on 2 December 2022, which revokes GR-1/2012 and all VAT provisions under GR-9/2021.
Below are the salient points of GR-44:
- Buyer or service recipients are jointly liable if the VAT cannot be charged to the seller or service provider and the buyer cannot prove that the VAT has been paid to the seller. GR-44 explains that this VAT can be paid via tax payment slip or the issuance of an underpaid tax assessment letter (SKPKB). Whilst under the previous regulation, the collection of this VAT is done via issuance of SKPKB.
- Minister of Finance can appoint another party to collect, pay and report the collected VAT. The other party, as referred herein, is directly involved in or facilitating the transaction between the transacting parties, including the transaction via a digital platform.
- Free gifts and/or self-use of taxable goods and/or taxable services are subject to VAT. The VAT treatment for productive or consumptive self-use is no longer differentiated. Further provisions on this matter will be regulated via Minister of Finance (MoF) Regulation.
- GR-44 confirms that collateral assets which are confiscated by a creditor and assets delivered to a buyer are considered as delivery of taxable goods. Further provisions on this matter will be regulated via MoF Regulation.
- Delivery of taxable goods as collateral is not treated as a taxable event if the collateral goods eventually are returned to the original owner (i.e., debtor)
- GR-44 provides further confirmation on the “Final” VAT regime as follows:
- The buyer can credit the “final” VAT charged to a buyer. However, sellers who are using the “Final” VAT regime cannot credit its input VAT.
- b. If a VAT-able entrepreneur delivers strategic goods and/or services subject to the “Final” VAT regime, the VAT rate used is based on the “Final” VAT regime rate. Further, the input VAT is not creditable since the VAT is still exempted or not collected under the strategic goods/services facility.
- For internal deliveries of self-use and free gifts (i.e., delivery from a Head Office to a Branch Office, or vice versa, or between branches), the taxpayer should still issue the tax invoice using IDR zero (IDR 0) as the tax base.
- GR-44 stipulates that for transactions using a foreign currency, the VAT and LST should be converted into IDR using the MoF exchange rate applicable at the time when the tax invoice or similar documents are supposed to be made. In relation to transactions with foreign vendors (i.e., for intangible goods and/or taxable service transactions), the tax payment slip is a similar document referred to in this article. This provision provides clarity for transactions in which the tax invoice or similar document was not prepared in a timely manner.
- In the event of dissolution, for inventory and/or assets which initially were not intended to be sold and which remain during the dissolution process, the VAT is considered to be payable as per below, whichever comes earlier.
- The Notary signed the deed of dissolution
- The end of the term of the establishment of the company as stated on the notarial deed
- The court decision which stated that the company had been dissolved
- The fact that the company is no longer doing its business activities or has been dissolved, based on audit/examination process, or based on the available data or document
Considering the above, in practice, most likely the VAT from remaining inventories and/or assets will be imposed during tax audit in relation with the tax ID revocation process. It may be best for the company to sell or dispose all inventories and/or assets before entering the dissolution process.
- In the event there is a change on the VAT rate, the former VAT rate is used if:
- The VAT due date is prior to the effective date of the new VAT rate
- The tax invoice (Faktur Pajak) or other documents treated as tax invoice is issued prior to the effective date of the new VAT rate
- Otherwise, the transaction will be subject to the new VAT rate
- In case a tax invoice is issued to an individual taxpayer, the tax invoice should mention the person’s tax ID (NPWP) or the identity number (Nomor Induk Kependudukan, or NIK). In the context of tax invoice issuance and crediting the VAT input, NIK has the same position as the (NPWP).
- GR-44 provides clarity on the three-month deadline on tax invoice issuance to be considered as valid tax invoice. For example, if a tax invoice should be issued by 20 December 2022, the three months will fall on 19 March 2023. If the tax invoice is issued after 19 March 2023, such tax invoice will not be considered as tax invoice.
- Provisions under implementing regulations of GR-1 and GR-9 will still be effective as long as it is not in conflict with the provisions under GR-44
Should you have any further queries on the above, please feel free to contact us.