FAQ Value Added Tax

 
WHAT IS VAT?
 
According to article 4 the Law Number 42 of the year of 2009, VAT is the tax imposed on:
a. the delivery of Taxable Goods within the Customs Zone by an entrepreneur;
b. the import of Taxable Goods;
c. the rendering of Taxable Services within the Customs Zone by an entrepreneur;
d. the use within the Customs Zone of Intangible Taxable Goods from outside the Customs Zone;
e. the use within the Customs Zone of Taxable Services from outside the Customs Zone;
f. the export of Tangible Taxable Goods by a Taxable Entrepreneur;
g. the export of Intangible Taxable Goods by a Taxable Entrepreneur; and
h. the export of Taxable Services by a Taxable Entrepreneur.
 
WHAT IS A TAXABLE PERSON FOR VAT PURPOSES?
 
Taxable Person for VAT purposes is a Firm which supplies Taxable Goods and or renders Taxable Services 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 determined as Taxable Person for VAT purposes.
 
WHAT IS A FIRM?
 
Firm is an individual or an entity, which in the business of produces goods, imports goods, exports goods, engages in trading activities, utilizes intangible goods obtained from outside the Customs Area, provides business services, or utilizes services obtained from outside the Customs Area.
 
WHAT IS TAXABLE GOODS?
 
Taxable Goods are goods, which according to their nature and legal status are movable, or immovable, and intangible assets, which are subject to VAT.
 
WHAT IS GOODS WHICH ARE NOT SUBJECT TO VAT?
 
Types of goods which are not subject to VAT are:
a. goods produced from mining or from drilling that are extracted directly from the source;
b. basic commodities vital to the general public;
c. food and beverages served at hotels, restaurants, cafés, food stalls and so forth, including food and beverages whether consumed on the premises or not, including food and beverages delivered by catering businesses; and
d. money, gold bars and commercial papers.
 
WHAT IS TAXABLE SERVICE?
 
Taxable Services are any service activity under a contractual agreement or legal arrangement to make the goods, facilities or rights, available to use. Including services provided base on order or request, in which the material is provided by the customer.
 
WHAT IS SERVICES WHICH ARE NOT SUBJECT TO VAT?
 
Types of services which are not subject to VAT are:
a. medical health care services;
b. social services;
c. postal services using stamps;
d. financial services;
e. insurance services;
f. religious services;
g. educational services;
h. artistic and entertainment services;
i. non-commercial broadcasting services;
j. public transportation services on land and water as well as domestic air transportation services that are an inseparable part of foreign air transportation services;
k. employment services;
l. hotel services;
m. services provided by the government in respect of carrying out general administration;
n. parking space provision services;
o. public telephone services using coins;
p. money transfer services using postal money orders; and
q. catering services.
 
WHAT IS THE TAX BASE FOR VAT?
 
Tax base for VAT is the Sales Price or Import Value or Export Value, or such other value as may be determined by the Minister of Finance Decree, to be used as the basis for calculating the tax.
 
WHAT IS SALES TAX ON LUXURY GOODS?
 
Sales Tax on Luxury Goods shall be imposed on:
a. a supply of Taxable Goods categorized as Luxuries by a Firm, which produces the goods within the Customs Area in the course of business or work;
b. the importation of Taxable Goods categorized as Luxuries.
Sales Tax on Luxury Goods imposed at the supply of the Taxable Goods categorized as Luxuries by the Firm producing them, or at the time of import.
 
WHERE TO REGISTER AS A TAXABLE PERSON?
 
Taxpayer should register at the place of residence, domicile or business s or such other place as determined by the Director General of Taxes, where tax should be pay.
The Director General of Taxes, upon written request, may determine one place or more as the place where tax should be pay.
 
IS THERE ANY EXEMPTION FOR REGISTRATION?
 
Small firms with a turnover not exceeding a limit determined by the Minister of Finance Decree are exempted from the obligation to register business for VAT purpose.
According Regulation of the Minister of Finance Number 68/PMK.03/2010, small firms are those with the turnover in a book year are not exceeding Rp.600.000.000,- supply taxable goods and render taxable services.
But small firms may choose to be determined as a Taxable person for VAT purposes even though their turnover does not exceed the limit describe in the ministerial decree.
Once the small firms choose to be confirmed as a taxable person for VAT purposes, all the obligation of taxable person should be fulfilled.
May be cancelled upon a written request
 
WHAT IS THE RULE TO CENTRALIZE THE PLACE OF VAT PAYABLE?
 
According to Regulations of General Director of Tax Number PER-19/PJ/2010, taxpayer may request one or more places to be tax payable place for VAT purpose. If a VAT centralization (i.e. choosing one place) is desired, an application should be submitted not later than three months before the commencing of the centralization.
 
WHAT IS THE RULE IF THE GOODS, WHICH HAVE ALREADY IMPOSED BY VAT AND SALES TAX ON LUXURY GOODS, ARE RETURNED BY THE BUYER?
 
Value Added Tax and Sales Tax on Luxury Goods paid on the supply of Taxable Goods, which are subsequently returned, may be deducted from Value Added Tax and Sales Tax on Luxury Goods in the Taxable Period in which the aforesaid Taxable Goods are returned, according to procedures determined by the Minister of Finance.
 
WHAT IS THE TAX RATE FOR VAT AND SALES TAX ON LUXURY GOODS?
   
a. The Value Added Tax rate is 10% (ten percent).
b. The Value Added Tax rate on the export of Taxable Goods is 0% (zero percent).
c. The rates of Sales Tax on Luxury Goods are between 10% (ten percent) and 75% (seventy-five percent) depending on types of goods.
d. On the export of Taxable Goods categorised as Luxuries, the Sales Tax on Luxury Goods is 0% (zero percent).
 
WHEN DO I HAVE TO FILE VAT RETURN?
 
VAT return should be submitted on monthly basis. Due date for filing VAT return is End of The Following Month. There is no annual VAT return.
Failure to comply with the filing deadline will be subject to an administrative sanction of Rp500,000.
 
WHAT IS THE MECHANISM TO CALCULATE THE VAT?
   
a. Value Added Tax payable shall be calculated by multiplying the tax rate by the Tax Base.
b. Input Tax in one Taxable Period is credited against Output Tax for the same Taxable Period.
c. In case there is no Output Tax has in one Taxable Period, Input Tax may still be credited.
d. In case within a specific Taxable Period, Output Tax is greater than input Tax, the difference is Value Added Tax, which should be paid by taxable Person for VAT purposes.
e. In case within a specific Taxable Period, creditable Input Tax exceeds output tax, the difference is surplus tax, which may be refunded or credited in the next Taxable Period.
f. In case within a specific Taxable Period, a Taxable Person for VAT purposes conducts both taxable and non-taxable supply, insofar as the amount of taxable supply can be identified exactly from the bookkeeping, the amount of creditable Input Tax shall be the Input Tax related to the taxable supply.
g. In case within a specific Taxable Period, a Taxable Person for VAT purposes conducts both taxable and non-taxable supply and insofar the as amount of Input Tax related to the taxable supply can not be identified exactly from the bookkeeping, the amount of Input Tax which may be credited against taxable supply shall be calculated by using guidelines for crediting Input Tax determined by the Minister of finance Decree.
h. The amount of Input Tax which may be credited by a Taxable Person for VAT purposes who pays Income Tax by using deemed profit governed by Law Number 7 of 1983 on Income Tax as amended by Law Number 36 of 2008, may be calculated by using guidelines for crediting Input Tax determined by the Minister of Finance.
 
IS THERE ANY CONDITION THAT INPUT TAX CANNOT BE CREDITED?
 
Input Tax may not be credited for costs incurred for:
a. the acquisition of Taxable Goods or Taxable Services before a firm is registered as a Taxable Person for VAT purposes;
b. the acquisition of Taxable Goods or Taxable Services which do not have direct connection with a firm’s business activities;
c. the acquisition and maintenance of motor vehicles, cars, jeeps, station wagons, vans, and “combi” vehicles, except the vehicles used as merchandised or hired goods;
d. the utilization of intangible Taxable Goods or Taxable Services from outside the Customs Area prior to confirmation as a Taxable Person for VAT purposes;
e. the acquisition of Taxable Goods or Taxable Services of which proof of tax is in form of a simple Tax Invoice;
f. the acquisition of Taxable Goods or Taxable Services of which Tax Invoice fails to meet the provisions referred to in paragraph (5) of Article 13 of the VAT Law;
g. the utilization of intangible Taxable Goods or Taxable Services from outside the Customs Area for which Tax Invoice fails to meet the provisions referred to in paragraph (6) of Article 13 of the VAT Law;
h. the acquisition of Taxable Goods or Taxable Services of which Input Tax is collected under the issuance of a tax assessment;
i. the acquisition of Taxable Goods or Taxable Services of which Input Tax is not reported in the Value Added Tax Return, which is found when the Return is audited by the tax office;
 
IS THERE ANY CHANCE TO CREDIT THE INPUT TAX IN THE OTHER PERIOD?
 
Creditable Input Tax that has not been credited against Output Tax for the same Taxable Period, may be credited in subsequent Taxable Period, not later than the third month following the end of the Taxable Period concerned, provided it has not been charged as a cost and has not been tax audited.
 
WHAT IS THE MECHANISM OF SALES TAX ON LUXURY GOODS?
 
Sales Tax on Luxury Goods payable shall be calculated by multiplying the tax rate by the Tax Base.
Sales Tax on Luxury Goods, which is paid on the acquisition, or importation of Taxable Goods categorized as Luxuries, may not be credited against either Value Added Tax or Sales Tax on Luxury Goods withheld according to the Law.
A Taxable Person for VAT purposes who exports Taxable Goods categorized as Luxuries may request refund on the Sales Tax on luxury Goods paid on the acquisition of the exported Taxable Goods concerned.
 
WHEN IS THE VAT PAYABLE?
   
1. Tax shall be payable at the time of:
  a) supply of Taxable Goods;
  b) import of Taxable Goods;
  c) rendering of Taxable Services;
  d) utilization of intangible Taxable Goods obtained from outside the Customs Area;
  e) utilization of Taxable Services obtained from outside the Customs Area; or
  f) export of Taxable Goods.
2. If payment is received before supply of Taxable Goods, rendering of taxable Services, the utilization of intangible Taxable Goods or the utilization of Taxable Services obtained from outside the Customs a, tax shall be payable at the time of payment.
 
WHERE IS THE VAT PAYABLE?
   
1) For a Taxable Person for VAT purposes which conducts supply, taxis payable at its place of residence, domicile or business activities or such other place as may be determined by the Director General of taxes Decree.
2) On a written request by a Taxable Person for VAT purposes, the Director General of Taxes may determine one place or more as the place or places where tax should be payable.
3) In case of imports, tax shall be payable at the point of entry of the Taxable Goods and shall be withheld through the Directorate General of Customs and Excise.
4) For an individual or an entity who uses intangible Taxable Goods and or Taxable Services within the Customs Area which are obtained from outside the Customs Area , tax shall be payable at the place of residence, domicile or business activities of the individual or the entity.
 
PLEASE EXPLAIN ABOUT A VAT INVOICE?
   
1) A Taxable Person for VAT purposes is obliged to issue a VAT Invoice for each supply of Taxable Goods and for rendering of Taxable Services.
2) Notwithstanding the provision of paragraph (1), a Taxable Person for VAT purposes may issue a single VAT Invoice consisting of all supplies to the same buyer of Taxable Goods or recipient of Taxable Services during one calendar month.
3) If payment is received before the supply of Taxable Goods or the rendering of Taxable Services, the VAT Invoice should be issued at the time of payment.
4) The time of issuance, format, size, availability and procedures for submission and correction of a VAT Invoice shall be determined by the Director General of Taxes.
5) A VAT Invoice should include information concerning the supply of Taxable Goods or the rendering of Taxable Services, which at least consists of the following:
  a. The name, address, and Taxpayer Identification Number of the Taxable Person for VAT purposes supplying the Taxable Goods or rendering the Taxable Services;
  b. The name, address, and Taxpayer Identification Number of the buyer of the Taxable Goods, or recipient of the Taxable Services;
  c. The type of Goods or Services, total Sales Price or Consideration, and amount of discount;
  d. The Value Added Tax charged;
  e. The Sales Tax on Luxury Goods charged;
  f. The code, serial number and date of issuance of the VAT Invoice; and
  g. The name, position, and signature of person authorized to sign the VAT Invoice.
 
WHO IS PROHIBITED TO ISSUE A TAX INVOICE?
 
An individual or an entity not registered as a Taxable Person for VAT purposes is prohibited from issuing a VAT Invoice.
If a VAT Invoice has been issued, the individual or entity should deposit the tax amount written in the VAT Invoice to the State Treasury.
 
IS THERE ANY CONDITION INDER WHISH OUTPUT VAT DOESNOT NEED TO BE CHARGED?
 
VAT need not be charged in part or in full, either temporarily or permanently, in respect of:
activities in specified zones or specified places within the Customs Area;
The supply of specified Taxable Goods or rendering of specified Taxable Services;
Imports of specified Taxable Goods;
The utilization within the Customs Area of specified intangible Taxable Goods obtained from outside the Customs Area;
The utilization within the Customs Area of specified Taxable Services obtained from outside the Customs Area.
 
IS THE INPUT VAT INCURRED CREDITABLE IF IT RELATES TO THE ABOVE-MENTIONED CONDITIONS?
 
Input VAT paid on the acquisition of Taxable Goods and or Taxable Services in connection with the supply for which output VAT is not charged due to the above-mentioned conditions, may still be credited. Input VAT paid on the acquisition of Taxable Goods and or Taxable Services in connection with the supply, which is exempt from the imposition of output VAT, may not be credited.
 
CAN I FILE THE VAT RETURN USING E-FILLING SYSTEM?
 
DGT has launched E-Filing system for VAT. To use this system, you should contact DGT Office for further information.
 
WHEN DO I HAVE TO PAY VAT?
 
VAT should be paid Before the VAT Return Filling Dateline.
The method of payment is similar with income tax, i.e. you can pay either manually or on line with E-payment system.
 
IS THERE ANY PENALTY FOR LATE PAYMENT OF VAT?
 
Late payment of VAT will be subject to an administrative penalty in the form of 2% (two percent) interest monthly, calculated from the due date of payment up to the date of payment where fraction of the month is treated as a 1 (one) full month shall be imposed.
 
WHEN CAN I GET MY TAX REFUND?
 
Before the refund is given, Tax Office will conduct a tax audit for VAT.

 

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