Segala yang Perlu Anda Tahu tentang Pajak Pertambahan Nilai (PPN) di Indonesia

What is VAT Tax in Indonesia?

Value-Added Tax (VAT) Indonesia is a tax imposed on most goods and services in the Indonesian Customs Area. In other words, a consumption tax is applied to each production stage until the final product sales. Therefore, Indonesia’s VAT has impacts on both end consumers and businesses.

InCorp Indonesia (formerly Cekindo) has compiled an essential guide with key points concerning tax obligations in Jakarta and across Indonesia, including VAT, that every business owner must know as it will affect their business and customers.

VAT Registration Procedures

According to Indonesia’s VAT law, businesses are mandated to register for VAT if their annual revenue reaches IDR 4.8 billion. Businesses with annual revenue below that threshold can register voluntarily. Here is the step-by-step process to register a business for VAT:

Step 1: Documents Preparation and Submission

Gather the required documents, such as the Tax Identification Number (TIN) and articles of association. Once you have all the necessary documents, visit the official website of the Indonesian Tax Authority (Dirjen Pajak), create an account, and submit the online VAT application to the portal.

Step 2: Verification

A tax officer will visit your company to verify the submitted documents, ensuring the information provided is valid and accurate. This process includes verifying the legal status of the business, the identity of the owners, and the validity of the provided documents.

Step 3: Approval

Approval will occur within five business days after the field verification. If your VAT registration is approved, you will receive an access code for the online VAT system and obtain Indonesia VAT registration number. The company’s director must then visit the tax office to receive the login ID and password, allowing access to information about VAT in Indonesia online.

VAT Rates in Indonesia

Indonesia’s VAT rates or usually called as Indonesia PPN are described as follows:

• 10% for most cases
• 5% or 15% depending on the government regulation
• 0% for export of taxable intangible and tangible goods
• 0% for export of services

VAT is calculated by applying your VAT rate to its tax base in Jakarta or other cities in Indonesia. The concerned parties agree on the tax base concerning the transaction value. 

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Some events must be used as tax base as well, and they are listed as follows:

• Transaction market value between parties
• Cost of sales of taxable goods for internal use or as gifts
• The auction price of taxable goods delivery
• The agreed price of taxable goods delivery
• Imported movies that are worth IDR 12 million each
• 20% of the total costs of land
• Retail selling prices of tobacco products import or delivery
• Package shipment services (10% of actual billing)
• Tour and tourism agency services – non-commission-based deliveries (10% of the actual billing)
• Deliveries of gold jewelry (20% of selling prices)
• Deliveries of freight forwarding (10% of actual billing)

VAT on Digital Services

Since July 1, 2020, a Value Added Tax (VAT) of 11% has been applied to digital services. These services encompass a range of offerings, including downloading/streaming apps, books, software, games, magazines, movies, and music, as well as online services like advertising, marketing, video conferencing, online retail, and online marketplaces.

Overseas businesses that meet specific criteria, as previously described, may be appointed as VAT collectors by the Indonesian Government. Their responsibilities include:

1. Charging VAT on sales of digital products.
2. Making monthly payments to the Indonesian Government.
3. Submitting a quarterly VAT return to the Indonesia Directorate General of Taxes (DGT).

There are limitations based on certain criteria, such as:

• The PMSE/PPMSE completed transactions with Indonesian consumers exceeding IDR 600 million in a year or IDR 50 million in a month.
• Traffic amount or access in Indonesia exceeds 12,000 in a year or 1,000 in a month.

An appointed VAT collector must charge Indonesian VAT on sales of digital products to Indonesian consumers. Therefore, businesses must apply VAT on sales from the first day of the month following their appointment as a VAT collector, and the VAT collected must be paid by the end of the following month. The VAT rate is 10% of the pre-tax amount. Additionally, a VAT collector is required to submit a quarterly VAT return by the end of the month following the quarter’s end.

Products and Services that Are Not Subject to VAT Indonesia

Non-taxable VAT

Here are the goods that are non-taxable under VAT in Jakarta and across Indonesia:

• Drilling or mining from direct extraction of their sources. Examples are natural gas, crude oil, coal, geothermal energy, gravel and sand, iron ore, copper ore, gold ore, tin order, silver ore, etc.
• Food and drink services in hotels and restaurants, both dine-in and takeaway
• Gold bars, securities, and cash
• Basic commodities such as salt, rice, salt, soybeans, corn, and sago

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Non-taxable Service under VAT

Non-taxable services under VAT in Indonesia are listed as follows:

• Medical and health services
• Mail services
• Social services such as funeral
• Religious services
• Insurance services
• Art and entertainment services
• Educational services
• Public transportation services
• Hotel services
• Manpower services
• Food and catering services
• Public telephone services
• Broadcasting services that are not relevant to advertising

VAT Exemption

Through the incentives government provided, here are some imports and purchases included in Indonesia’s VAT exemption, including:

• Strategic goods, such as machinery and equipment
• Items derived from business activities in the Maritimes
• Raw materials for manufacturers in a Bonded zone
• Imports and delivery services, equipment, and other supplies that are required to perform a project financed by foreign aid.
• Imports and purchases by companies in certain industries such as national shipping and airlines.
• Delivery and/or import of taxable goods into a Free Trade Zone

What is included in the VAT invoice?

A VAT invoice must include this information:

• Provided VAT invoice number
• Identification such as Name, Tax Identification Number (NPWP), and address
• Invoice date
• Details of taxable supplies, such as quantities, prices, etc
• Net and gross VAT amounts
• Currency rates
• Name and signature of the entitled

Reporting Your Indonesia VAT

Companies considered Pengusaha Kena Pajak, or PKP, must report their VAT and related business activities monthly. 

Companies with several branches must register each with the Kantor Pelayanan Pajak or KPP. VAT liabilities are settled with an input-output mechanism (input tax and output tax).

VAT Refund in Indonesia

VAT refunds are applicable in Jakarta and other cities in Indonesia. Companies can submit refund applications at the end of a book year. The Directorate General of Taxes (DGT) decides on VAT refunds. It depends mainly on the VAT audit within 12 months of receiving the refund application.

Application is considered approved as well if there is no decision made. Companies must then submit the supporting documents to the DGT within a month.

READ MORE:

• More Scope of Services in Export are Exempted from Value-Added Tax
• Your Advanced Guide to Personal Income Tax in Indonesia

How InCorp Indonesia Can Help

At InCorp Indonesia (formerly Cekindo), we believe in providing our customers the most professional and streamlined tax services, including VAT reporting and refunds in Jakarta and across Indonesia. 

Our experts with in-depth knowledge of tax laws in Indonesia will assist you in dealing with all tax-related situations, with several benefits awaits:

• Streamline process: Our seasoned specialists ensure that the tax services registration process complies seamlessly with current regulations, without affecting your business operations.
• Time and cost saving: We offer a one-stop tax solution that optimizes time and cost efficiency, tailored to your corporate needs.
• Certified tax consultants: Our expert team at InCorp Indonesia consists of certified professionals who provide comprehensive assistance and deeper insights into effective tax services.

To know more about how InCorp Indonesia can help your company navigate the complex tax system in Indonesia, get in touch by filling in the form below.