Everything You Need to Know about Value-Added Tax (VAT) in Indonesia

Value-Added Tax (VAT) 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 Rates in Indonesia

VAT rates in Indonesia are described in detail 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. 

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)

Products and Services that Are Not Subject to VAT in Indonesia

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

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

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.

Update from the government: More Scope of Services in Export are Exempted from Value-Added Tax

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.

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.