Indonesian VAT

Scope of VAT
In Article 4 of the Indonesian VAT Law, VAT is the tax imposed on:

1. supply of Taxable Goods by a Taxable Person for VAT purposes within the Custom Area of Indonesia;
2. importation of Taxable Goods;
3. rendering of Taxable Service by a Taxable Person for VAT purposes in the Customs Area of Indonesia;
4. utilization of intangible Taxable Goods obtained from outside the Customs Area of Indonesia within the Customs Area;
5. utilization of Taxable Service obtained from outside the Customs Area of Indonesia within the Customs Area; or
6. exportation of Taxable Goods by a Taxable Person for VAT purposes

Key Terms
So, there are some terms in VAT we have to know like Taxable Goods, Taxable Service, Taxable Persons, Firm, Tax Invoice and Custome Are. These meaning of term are important to understand VAT Concept.

Taxable Goods (or Barang Kena Pajak in Indonesian) are goods, which according to their nature and legal status are movable, or immovable, and intangible assets, which are subject to VAT.

Taxable Services (or Jasa Kena Pajak in Indonesian) are any service activity under a contractual agreement or legal arrangement which makes available for use goods, facilities or rights, including services provided on order or request, for which the material is provided by the customer, which are subject to tax according to the VAT law.

Taxable Person (or Pengusaha Kena Pajak in Indonesian) for VAT purposes is a firm which supplies Taxable Goods and or renders Taxable Service according to the VAT Law, excluding small firms with a turnover not exceeding a limit determined by the Minister of Finance Decree. However, small firms may choose to be confirmed as Taxable Person for VAT purposes.

Firm (or Pengusaha in Indonesian) is an individual or an entity, which in the course of business or work, produced goods, imports goods, export goods, engages in trading activities, utilizes intangible goods obtained from outside the Customs Area, provides business service, or utilizes service obtained from outside the Customs Area.

Customs Area (or Daerah Pabean in Indonesian) is the Territory of the Republic of Indonesia, which covers land, sea, and air as well as specific areas within the Exclusive Economic Zone and the Continental Shelf within which Law Number 10 Year 1995 on Customs apply.

Tax Invoice (or Faktur Pajak in Indonesian)is proof of tax withheld by a Taxable Person for VAT purposes on supply of Taxable Goods or rendering of Taxable Services or by the Directorate General of Customs and Excise on the importation of Taxable Goods.

Non Taxable Goods and Services
There are some kinds of goods which are excluded as taxable goods in Art. 4A of Indonesian VAT Law. Their catagories are :

1. Products of mining and drilling, taken directly from the source;
2. Daily necessities needed by public
3. Food and beverages served in hotel, restaurant, and such other places;
4. Money, gold, and valuable documents.

Some kinds of services are also excluded as taxable services. They are
1. healthcare;
2. social welfare;
3. postal delivery;
4. banking, insurance and financial leasing;
5. religion;
6. education;
7. culture and entertainment which has been imposed by entertainment tax;
8. broadcasting, not include advertising;
9. shipping and inland public transportation;
10. manpower;
11. rendering of services by the goverment in efforts to run the goverment in general.

VAT Mecanism

In general, taxable persons who supply taxable goods or render taxable service have to impose VAT to their buyer. The imposing VAT is done by witholding 10% VAT rate of taxbase. As proof of this VAT witholding, taxable persons have to make tax invoice. Because this tax invoice is made when they sell, the tax invoice is called output tax invoice. The VAT witheld then is called output tax.

As taxable persons buy taxable goods or taxable services, they have to pay additional payment of VAT too which witheld by their supplier. This VAT then is called input tax. The witholding proof is called input tax invoice.

In a month period, taxable persons must calculated how much they withold output tax and how much input tax they have. The output tax in a month is subtracted or credited by the input tax in a month too. If there is a positive result, they have to pay to government account. In contrary, if any negative result, they can ask restitution to government.

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Income Tax

Income tax shall be imposed on any taxable person in respect of income during a taxable year. Thus, the imposing of income tax has to fulfill that there are tax person and tax object i.e the income. The imposing income tax is engaged in a certain period named taxable year. The taxable year is calendar year but if the taxpayer want, the taxable year can be accounting year also.

The Income Tax Law regulates income tax imposition on Taxable Persons in relation to income received or accrued in a taxable year. Taxable Person will be subject to tax if that person receives or accrues income. A Taxable Person who derives income is called a Taxpayer under this law. A Taxpayer is taxed on the income received or accrued during a taxable year or a fraction of a taxable year, if the tax obligations commence or end in a taxable year.

The term a taxable year under this law means a calendar year. However, a Taxpayer may use an accounting year which is different from the calendar year insofar as the accounting year has the period of 12 (twelve) months.

Taxpayer
Taxable person consist of resident and non resident tax person. The resident tax person consist of individual and entity. The non resident tax person are Permanent Establishment (PE) and Non PE. The resident taxpayer and PE have to fill the annual tax return. The individual resident taxpayer is an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia. The entity resident taxpayer is an entity established or domiciled in Indonesia.
The term non resident taxpayer means :

• an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia
• an individual who does not reside in Indonesia or is present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, and an entity which is not established or domiciled in Indonesia deriving income from Indonesia other than from conducting business or carrying out activities through a permanent establishment

One important difference between a resident taxpayer and a non-resident taxpayer is that a resident taxpayer is taxed on his/her income originating from Indonesia and/or from abroad, however a non-resident taxpayer is taxed on his/her income derived only from Indonesia. Therefore, any individual residing in Indonesia or any individual staying in Indonesia for more than 183 days within a period of 12 months, or any individual who, within a fiscal year, stays in Indonesia and intend to reside in Indonesia, is taxed on his/her worldwide income under any name and form whatsoever.

Taxable Object
The Tax Object shall be the income, namely any increase in economic benefit derived by a taxpayer, which may be used for consumption or increase the wealth of the taxpayer concerned, under any name and form whatsoever, including:

• Any remuneration or compensation in relation to work, services, or activities, derived from employment or independent profession, including: wages, salary, honoraria, doctor’s fees, actuarial fees, accountant’s fees, lawyer’s fees
• Any income or compensation from any business or activity
• Any income from capital including from movable and immovable assets, such as reward and gain from forgiveness of debt (“haircuts”), etc.

Tax Rate
The income tax is used to find how much yearly taxpayer income tax. Yearly income tax is tax rate x (taxable object - deductible expense - loss carry forward.)
Tax rate for resident individual taxpayer :

• 5% (five percent) for Rp25,000,000.00 (twenty five million rupiahs) or less
• 10% (ten percent) for over Rp25,000,000.00 (twenty five million and one rupiahs) - Rp50,000,000.00 (fifty million rupiahs)
• 15% (fifteen percent) for pver Rp50,000,000.00 (fifty million and one rupiahs) - Rp100,000,000.00 (one hundred million rupiahs)
• 25% (twenty five percent) for over Rp100,000,000.00 (one hundred million and one rupiahs) – Rp200,000,000.00 (two hundred million rupiahs)
• 35% (thirty five percent) for over Rp200,000,000.00 (two hundred million rupiahs)

Tax rate for resident corporate taxpayer and PE :

• 10% (ten percent) for Rp50,000,000.00 (fifty million rupiahs) or less.
• 15% (fifteen percent) for over Rp50,000,000.00 (fifty million and one rupiahs) – Rp100,000,000.00 (one hundred million rupiahs)
• 30% (thirty percent) for over Rp100,000,000.00 (one hundred million rupiahs)

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Download Indonesian Tax Treaty

Here are tax treaty files ind pdf between Indonesia and others country. Just click below.

1. United States of America
2. United Kingdom
3. Australia
4. Singapore
5. Japan
6. India

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Download Indonesian Tax Law

Here are three Indonesian tax law. You can download these laws by clicking the link below.

Income Tax Law

Value Added Tax

General Tax Rules And Procedures Law

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