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Updates on VAT facilities in Indonesia (Government Regulation No. 49/2022).

On December 12, 2022, the Indonesian government issued Government Regulation no. 49/2022 (GR-49) which applies retrospectively from 1 April 2022 and revokes the following previous regulations:

  1. GR No.146 Year 2000 (GR-146) as lastly amended by GR No.38 Year 2003 (GR-38) on the Import and/or delivery of certain VATable goods and services which are exempted from VAT
  2. GR No.81 Year 2015 (GR-81) as lastly amended by GR No.48 Year 2020 (GR-48) on the Import and/or delivery of strategic goods and services which are exempted from VAT
  3. GR No.40 Year 2015 (GR-40) as lastly amended by GR No.58 Year 2021 (GR-58) on the Delivery of clean water which is exempted from VAT
  4. GR No.50 Year 2019 (GR-50) on the Import and/or delivery of certain means of transportation and the delivery and/or the use of related services upon which VAT is not collected

However, all relevant implementing regulations remain valid to the extent that they do not contradict GR-49.

Below are the five categories of VAT facilities regulated under this GR-49:

1. Import and/or delivery of VATable goods and services that are exempted from VAT

Import and/or delivery of VATable goods and services below are exempted from VAT as follows:

  1. Polio vaccines, COVID-19 vaccines
  2. Educational books
  3. Construction service for the construction of places for religious purposes
  4. Construction services by contractors for the construction of places/buildings intended for victims of a national disaster which was paid by the State Income and Expenditure Budget, Regional Income and Expenditure Budget, and or donations
  5. Taxable goods and/or Taxable services other than Construction services received by ministries, agencies, or institutions that handle disasters at the central government or regional governments in handling national disasters

An Exemption Letter (Surat Keterangan Bebas/SKB) is not required to enjoy this facility.

2. Import and/or delivery of “strategic” goods which are exempted from VAT

Import and/or Delivery of strategic goods which are exempted from VAT are as follows:

  1. Machinery and factory equipment that form a single unit, either installed or detached, which are used directly in the process of producing Taxable Goods by the Taxable Entrepreneur who produces the said Taxable Goods, including those whose import is carried out by the party carrying out the integrated construction work, excluding spare parts
  2. Goods produced from business activities in the marine and fishery sector, both catching and cultivating, subject to certain requirements
  3. Untanned raw hides and skins
  4. Cattle subject to certain requirements
  5. Seeds and/or seeds from an agricultural, plantation, forestry, animal husbandry, or fishery goods;
  6. Animal feed, fish feed, and/ or feed ingredients for the manufacture of animal feed and the main raw materials for fish feed, excluding feed additives and feed supplements, subject to certain requirements
  7. Silver handicraft raw materials in the form of silver granules and/or in the form of silver bars
  8. Electricity including electricity connection fees and electricity load costs, except for houses with power above 6,600 (six thousand six hundred) amperage voltage
  9. Clean water excluding water that has been treated with special treatment and packaged in bottles or other packaging and meets drinking water requirements (refill drinking water)
  10. Weapons, ammunition, spare parts, and other military equipment imported by or delivered through various government bodies, a state-owned Entity, or the Indonesian National Army
  11. Goods for museums, zoos, and similar public places as well as for nature conservation
  12. Presidential vehicles (NEW)
  13. Sugar for consumption in the form of white crystalline sugar derived from sugarcane without added flavouring or colouring matter (NEW);
  14. Mining and drilling products that are taken directly from the source but not including coal;
  15. Liquefied natural gas andcompressed natural gas (NEW)
  16. Goods imported by the government for public use
  17. Medicines imported using the State Budget
  18. Human therapy materials, blood grouping, and tissue materials imported using the State Budget
  19. Public houses, student dormitories, with certain requirements
  20. Units of public flats whose acquisition is financed through subsidized housing loans/financing; with certain requirements
  21. Clean water excluding water that has been treated with special treatment and packaged in bottles or other packaging and meets drinking water requirements (refill drinking water)

Some of the goods need an SKB (tax exemption letter) to enjoy the facility whilst others do not.

3. Delivery of strategic services within the Customs Area and/or the use of strategic services from outside the Customs Area to within the Customs Area that is exempted from VAT

Delivery of strategic services within the Customs Area and/or the use of strategic services from outside the Customs Area to within the Customs Areas that are exempted from VAT are as follows:

  1. Medical health services
  2. Social services
  3. Mail delivery services with postage
  4. Insurance services
  5. Education services
  6. Non-advertising broadcasting services
  7. public land and water transportation services as well as domestic air transportation services which are an integral part of foreign transportation services
  8. Labor services
  9. Public telephone services using coins
  10. Money transfer services by postal money orders
  11. Rental services for public flats and public houses
  12. Services received by the Defence Ministry or the Indonesian National Army for certain purposes

4. Import and/or delivery of strategic goods, delivery of strategic services within the Customs Area, and/or the use of strategic services from outside the Customs Area to within the Customs Area, on which VAT is not collected

Import and/or delivery of strategic goods, delivery of strategic services within the Customs Area, and/or the use of strategic services from outside the Customs Area to within the Customs Area, on which VAT is not collected, as follows:

  1. Water transportation equipment, underwater transportation equipment, air transportation equipment, trains, and their spare parts, shipping safety equipment, and human safety equipment, and aviation safety equipment and human safety equipment imported by ministries or government agencies that carry out maritime affairs government in the field of defence or state security
  2. Sea transportation vessels, river transport vessels, lake transport vessels and ferry vessels, fishing vessels, pilot boats, tugboats, barges, and their spare parts, ship equipment, shipping safety equipment, and human safety equipment which are imported and used by national commercial shipping companies, national fishing companies, companies operating national port services, and companies operating river, lake and national ferry transportation services following their business activities
  3. Aircraft and its spare parts, aviation safety equipment and human safety equipment, and equipment for repair and maintenance imported and used by national commercial air transportation business entities
  4. Trains and their spare parts, equipment for repair and maintenance, and railway infrastructure imported and used by business entities operating public railway facilities and/or business entities operating public railway infrastructure
  5. Gold bars other than for the government’s reserves
  6. Services received by national commercial shipping companies, national fishing companies, national port service provider companies, national river, lake, and ferry transportation service provider companies, national commercial air transportation business entity
  7. Maintenance and repair services for trains received by business entities operating public railway facilities

5. Import of VATable goods exempted from import duty on which VAT and LST are not collected

Import of VATable goods exempted from Import Duty on which VAT and LST is not collected, as follows:

  1. Gifts for public worship, charity, social, or cultural by bodies or institutions in the field of public worship, charity, social, or culture
  2. Goods for scientific research and development
  3. Goods for the special needs of persons with disabilities by social agencies or institutions that take care of persons with disabilities
  4. Crates or other packages containing bodies or ashes
  5. Goods from the transfer of Indonesian workers working abroad, students studying abroad, civil servants, members of the Indonesian National Armed Forces, or members of the Indonesian National Police who serve abroad for at least 1 (one) year, if the goods are not to be traded and obtain a recommendation from the local representative of the Republic of Indonesia
  6. Personal belongings of passengers, the crew of transportation means, border crossers, and goods sent up to a certain amount
  7. Temporary Imported goods following the provisions of laws and regulations regarding temporary Import
  8. Goods that have been exported are then re-imported in the same quality as when they were exported
  9. Goods that have been exported for repair, work, and testing, then re-imported
  10. Goods and materials to be processed, assembled or installed on other goods that have ease of import for export purposes;
  11. Goods and materials or machines imported by micro, small and medium businesses or industries or consortiums for micro, small and medium businesses or industries using import facilities for export purposes
  12. Goods in the context of cooperation agreements/coal mining concession works carried out by contractors of cooperation agreements/coal mining concession works with certain requirements
  13. Gift/grant shipments for the benefit of natural disaster relief with certain requirements

The provision of VAT which is not collected on import of goods mentioned above, is without the use of Statement Letter of VAT is not collected.

Transitional provisions

As mentioned above, the facilities under GR-49 are applicable retrospectively from 1 April 2022. For transactions that occurred between 1 April 2022 to 11 December 2022 in which the VAT should be exempted or not-collected, however, the VAT has been collected or paid, the following shall apply:

For sellers:

  1. The VAT collected is still required to be paid to the State treasury
  2. Input VAT related to domestic deliveries which should have been entitled to the VAT exemption facility, cannot be credited. Whilst Input VAT related to domestic deliveries which should have been entitled to VAT not collected, can be credited subject to fulfilling the prevailing tax regulation

For buyers (e.g. importers, recipients of services, etc.):

  1. If the buyer is a VATable Entrepreneur (Pengusaha Kena Pajak/PKP), then the Input VAT can be credited
  2. If the buyer is a non-PKP, then the VAT paid is considered as tax which should not be payable (which should be refundable)

The taxpayer needs to pay the VAT on the imports and/or delivery of certain goods which previously VAT is not collected if, within 4 years, the goods are used not following the original purposes and/or transferred to another party, either partially or in whole. The VAT should be paid at the latest one (1) month after the requirements are not met and the VAT paid then cannot be credited.

The VAT exemption on the taxable goods and/or services and the VAT/ LST non-collectible under GR-49 are temporary and will be evaluated by the Minister of Finance after considering the economic conditions and their impact on the state revenue.

Below are the key points from administration perspective on VAT exempted versus VAT not collected goods and/or services:

VAT exemptedVAT not collected
VAT rate0%
Code of tax invoice080070
VAT input related to the sales of goods and or servicesNot creditableCreditable

Should you have any further queries on the above, please feel free to contact us.

Updates on VAT facilities in Indonesia (Government Regulation No. 49/2022)

About Acclime Indonesia.

Acclime Indonesia helps established multinational companies and startups start and operate their business in Indonesia. By seamlessly navigating our clients through the complexities of the Indonesian laws and bureaucracy, we allow them to reclaim valuable time and fully focus on growing and developing their business.