The taxation system in Indonesia is made up of several levies which apply to both companies and individuals. If companies are levied the corporate tax and individuals the personal income tax, which are direct taxes, there are also indirect levies among which the value-added tax (VAT) or the goods and services tax (GST) is the most important one. The VAT applies to certain goods and services sold in Indonesia. If you are seeking help for VAT registration in Indonesia, please get in touch with our company formation agents. Also, note that the services of our immigration lawyers in Indonesia are at your disposal if you are planning a relocation.
| Quick Facts | |
|---|---|
| VAT registration services | Yes |
|
Standard VAT rate |
11% |
|
Lower rates |
0% |
| Who needs VAT registration | Companies delivering services or goods exceeding IDR 4.8 billion in one fiscal year |
| Time frame for registration |
2 weeks |
| VAT for real estate transactions |
All or partly exempt on the sale of certain residential property |
| Exemptions available |
Companies in free trade zones are not subject to VAT registration |
| Period for filing |
Monthly VAT return filing |
| VAT returns support | Yes, upon request from our team |
| VAT refund | It can be claimed at the end of the fiscal year |
| Local tax agent required |
Recommended |
| Who collects the VAT |
Directorate General of Taxes |
| Documents for VAT registration |
– filled in application form; – the company’s registration documents; – documents for the company’s director |
| VAT number format |
15 digits |
| VAT de-registration situations |
Cesation of activities |
Table of Contents
VAT registration for foreign companies in Indonesia
In Indonesia, VAT registration is vital for foreign businesses to follow tax laws and be part of the VAT system. Here is a general guide:
- Start by applying to the tax authorities with the help of our lawyers, providing all necessary business details.
- Submit the required documents, like your company’s establishment deed and tax ID.
- The tax authorities review your application, and upon approval, provide a VAT ID and registration certificate.
Our lawyers also take care of filing VAT returns, either monthly or quarterly, depending on your turnover. They also ensure the timely transfer of collected VAT to the authorities.
VAT registration for local companies in Indonesia
To register a company for VAT in Indonesia, follow these general steps:
- Determine eligibility: Ensure that your company meets the eligibility criteria for VAT registration in Indonesia. Businesses with an annual turnover above a certain threshold are required to register for VAT. For instance; the annual sales threshold for VAT registration in Indonesia is IDR 4.8 billion;
- Prepare required documents: Gather the necessary documents, which typically include your business registration certificate, Tax Registration Number Nomor Pokok Wajib Pajak (NPWP), articles of association, and other relevant corporate documents. It’s advisable to consult with our company incorporation expert in Indonesia who can guide you through the registration process, ensuring compliance with local tax laws and regulations;
- Submission: Visit the official website of the Indonesian tax authority (Direktorat Jenderal Pajak) and access the online VAT registration portal. You may need to create an account with the help of our specialists;
- Verification: Your application and accompanying documents will undergo scrutiny by the tax authorities. Also, following the submission of your application, a tax officer will conduct a field visit to your company premises to verify the accuracy of the information provided. It is crucial to ensure that your office is operational and that there is a representative available during the visit;
- Approval: Following the field verification, a decision will be rendered within five business working days. If your application is approved for VAT registration, you will receive an access code for the online VAT system. Once you obtain this code, the business director must personally visit the tax office to receive the login ID and password;
- Compliance: Once registered, you must comply with the VAT regulations, including charging VAT on applicable goods and services, keeping proper records, filing regular VAT returns, and remitting the collected VAT to the tax authorities within the specified timeframe. Your company will be required to file regular VAT returns, usually on a monthly or quarterly basis, depending on your turnover and other factors.
Be prepared for tax audits by the Indonesian tax authorities to ensure ongoing compliance with VAT regulations. It’s essential to stay informed about any updates or changes in VAT regulations in Indonesia, as tax laws and thresholds can evolve. Consulting with our company formation specialists in Indonesia experienced in Indonesian tax matters is highly recommended to navigate the process smoothly and remain in compliance with tax regulations. Moreover, if you are planning to open a company in Indonesia, you are welcome to get help from our agents.
Few amendments in Indonesian VAT law
Firstly, joint responsibility for VAT payment in Indonesia involves two scenarios. It is not enforced if the VAT can be collected from the seller or if the buyer can provide proof of VAT payment to the seller. In such cases, no joint responsibility is imposed. However, joint responsibility may be enforced if the VAT cannot be collected from the seller and the buyer cannot demonstrate VAT payment to the seller. This responsibility is established through the issuance of an Underpaid Tax Assessment Letter (SKPKB) or an Additional Underpaid Tax Assessment Letter (Surat Ketetapan Pajak Kurang Bayar Tambahan), or via self-assessment using a tax payment slip (Surat Setoran Pajak).
Secondly, the calculation of VAT and luxury goods sales tax (LST) in cases where these taxes are already included in the selling or delivery price has been updated. PP-1 introduced formulae for this calculation. PP-44, implemented from 1 April 2022, adjusts these formulae to accommodate the new VAT rate of 11% (and the forthcoming 12% rate by 1 January 2025 at the latest).
Lastly, in the past, when dealing with transactions in a currency other than the Indonesian Rupiah (IDR), the conversion into IDR was based on the foreign exchange rate set by the Ministry of Finance (MoF) decision letter (KMK rate) on the VAT invoice’s preparation date. However, under the updated guidelines in PP-44, such transactions must now be converted into IDR using the KMK rate in effect on the due date for issuing the VAT invoice or any equivalent document.
You can get additional information about these changes in the VAT law from our company incorporation consultants in Indonesia. Besides this, if you have additional questions about immigration to Indonesia, the services of our lawyers are at your disposal.
Which businesses do not need VAT registration in Indonesia?
Karimun Island, Bintan Island, and Batam Island are designated as free trade zones. Within these zones, businesses are not obligated to undergo VAT registration in Indonesia. Furthermore, the supply of taxable goods and imports of taxable goods within the free trade zones are VAT-exempt. Additionally, the supply of intangible goods within these zones is also exempt from VAT. If you are interested in learning more about the free trade zones in Indonesia, you can consult our consultants. They can also help you set up a company in Indonesia.
Goods and services exempt from the VAT in Indonesia
Indonesian companies are required to supply the following VAT-exempt goods and services:
- mineral and natural resources;
- commodities, such as basic food products;
- food and drinks supplied by hotels and restaurants;
- money and securities;
- educational services;
- financial services;
- insurance services;
- healthcare services;
- touristic services.
Other services are exempt from VAT in 2023. Our team of company incorporation experts in Indonesia can give you complete information about these exceptions and, upon request, provide you with a comprehensive and personalized analysis to determine the rules (and possible exemptions) that may apply in your case.
To levy the GST, Indonesian companies must register for VAT and report the liabilities resulting from the sale of taxable goods and services every month. Also, at the end of every financial year, companies are entitled to file for VAT refunds with the tax authorities in Indonesia.
VAT registration, filing, and payment are part of our tax and accounting package. Companies can rely on the services provided by our accountants in Indonesia for matters concerning bookkeeping, preparing and filing annual financial statements, payroll and other taxes, monthly, quarterly, or annual financial reports, general ledger review, and more. You can reach out to us for complete information about our services.
For other questions, such as those concerning Indonesian immigration, please do not hesitate to consult our team of experts. We specialize in all matters concerning residency, permanent relocation, or permanent residency. Our team can answer specific questions, based on the applicant’s purpose of staying in the country (business, employment, family reunification, etc.).
Goods and services taxable under the GST in Indonesia
Companies or sole traders in Indonesia must levy the value-added tax on the following:
- the delivery of goods;
- the delivery of services;
- the import of certain taxable goods;
- the export of certain taxable goods or services;
- the consumption and use of goods, respectively services from abroad.
The standard VAT rate in Indonesia is 10%, however, there are also certain services and goods which are exempt from the VAT or are applied at lower rates. Also, the VAT can be increased or decreased to 15%, respectively to 5% by the government. Investors who are interested in immigration to Indonesia to start a business should be aware of these rates. It should be noted that Indonesia levies a separate GST on the sale of luxury items which ranges between 10% and 50%.
Our company registration agents in Indonesia can offer more information on the VAT rates. Our Indonesian lawyers can help answer other questions concerning tax matters and tax law. With our help, you will fully understand the taxation regime that applies in your case, either as a foreign national deriving income from the country or as a business that offers local and international services. You can reach out to us if you have any questions about our legal services.
Other taxes on corporations in Indonesia, relevant to those interested in company formation in 2023, include the following:
- The corporate income tax of 22%;
- The branch remittance tax, with a value of 20%, can be reduced in some cases;
- Social security contributions with a value of 0.24%-1.74% for work accident protection, 0.3% for death insurance, and 2% for the pension plan (subject to a cap), along with others.
Our lawyers in Indonesia can give you details on the tax rates applicable to individuals. If you have any further questions about VAT registration in Indonesia, please contact us.
Besides VAT, our accountants in Indonesia are here to assist you if you are seeking help with your company’s accounting.