VAT (Value added Tax) is levied at each stage of production of both goods and services up to the final product sales in Indonesia. VAT and GST (Goods and Service Tax) are called Pertambahan Pajak Nilai or PPN. The usual VAT tariff in Indonesia is 11%. You can register for VAT only if your annual turnover is more than 4.8 billion Indonesian rupiah (IDR).
What is VAT?
VAT stands for Value Added TAX, introduced in 1985. VAT permits Govt. to charge VAT in between 5% to 15%. VAT is applicable on sales of Goods and Services at a rate of 11% starting 1 April 2022 onwards. VAT on export is Zero rated, the imports are subject to VAT. VAT is also known as PPN (Pajak Pertambahan Nilai in Indonesia).
Who needs to Register for VAT?
Businesses are required to register for VAT (Value Added Tax), Who have more than 4.8 billion Indonesian rupiah (IDR) turnover in one year. Businesses who have less than 4.8 billion Indonesian rupiah (IDR) turnover can also apply for Voluntary Registration. Once registered the Taxpayer is granted to TIN (Tax Identification Number) of 15 digits.
For Calculate your VAT, Please our Indonesia VAT Calculator
Products and services not subjected to VAT
Products that are exempt from VAT:
- Products from mining that are extracted from the source, such as crude oil, coal, geothermal energy, natural gas, gravel and sand, iron ore, gold ore, silver ore, limestone, gemstone, phosphate, clay, copper ore, and coal.
- Foods and drinks served in restaurants and hotels.
- Basic commodities such as rice, soybeans, corn, sago, fresh meat, meat, eggs, milk, fruit, vegetables, tubers, salt, ingredients and sugar.
Services that are exempt from VAT:
- Mail services
- Educational services
- Religious services
- Financial services
- Insurance services
- Hotel services
- Insurance services
- Medical and health services
- Public telephone services
- Food and catering services
Free trade zones in Indonesia
Karimun Island, Bintan Island, and Batam Island are free trade zones in Indonesia. Businesses in the free trade zones are not required to register for VAT. Supply of taxable Goods and imports of taxable Goods in free trade zones are exempt from VAT. Supply of intangible Goods in free trade zones are also exempt from VAT.
Also read about: Indonesia Income Tax Rate
How to register for VAT in Indonesia?
1: Application submission
First you need to complete the application form with required business documents, including the Tax Registration Number Nomor Pokok Wajib Pajak (NPWP) of the business director.
2: Field verification
Once the application is submitted, a tax officer will come to your company. The field verification is conducted to verify whether the provided information is valid or not.
3: Approval
After the field verification, the decision will be made after five business working days. You’ll get an access code that can be used for the online VAT system if you’re approved as a VAT-able entrepreneur. When you get the code, the business’s director must visit the tax office to get the login ID and password.
What is included in the VAT invoice?
Indonesia VAT invoice must have the following information:
- VAT invoice number provided by the tax authority.
- Name, TIN (tax identification number) and address of the seller.
- Name, address , and TIN of customer.
- Date of the invoice.
- Clear description of the taxable supplies.
- 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 provide the above information, it may lead to a fine of 2% from the tax base. Invoices must keep in records at least for 10 years.
VAT refunds
When to claim VAT refunds?
VAT refunds can be claimed at the end of the financial year.
VAT refund approval
The decision of VAT approval is done by DGT (Directorate General of Taxes) and results in a tax audit carried out within 12 months. Refund application can also be approved if the DGT does not make any decision within 12 months. So, companies must apply for VAT refund along with required documents 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 suppliers of goods.
VAT Reporting
VAT enables the taxpayers to report their VAT and business activities on a monthly basis. The monthly VAT settled at the end of the month. Penalties for late returns and payment are a fine of IDR 500,000 and 2% per month from the VAT.
VAT enabled the taxpayers to register branches with the Tax service office. VAT also enables the Taxpayers to centralise its VAT reporting by submitting a written notification to the DGT.
VAT exemption in Indonesia
Some Imports and Purchases are exempted from VAT, provided by the Govt.
- Strategic goods.
- Raw materials.
- Imports and delivery of services.
- Imports and purchases made by companies in certain industries.
FAQs
1: What is the VAT number in Indonesia?
NPWP (Nomor Pendaftaran Wajib Pajak) is a 15 digit Identification Tax Number given by the Tax Office.
2: Is VAT applicable in Indonesia?
With a few exemptions, VAT (Value Added Tax) is applicable on sales in Indonesia. 11% is the starting rate in Indonesia, only registered businesses can charge VAT.
3: Which country has no VAT?
Hong Kong and Gibraltar have no GST or VAT tax on sales of Goods and Services.
4: Does Indonesia have sales tax?
The standard rate of VAT is increasing to 11% as from 1 April 2022. A business who has more than 4.8 billion Indonesian rupiah (IDR) turnover in 1 Year, must have to register for VAT.
Conclusion
VAT is tax on most Goods and services supplied in Indonesia. To register for VAT you must have 4.8 billion Indonesian rupiah (IDR) turnover in the last 1 Year. To register for VAT, please follow our above provided instructions. After registration for VAT, you must provide information related to the sale and customer otherwise you may face a penalty.
