Value added tax
Value added tax applies to the import and delivery of most goods and services. Insurance and banking services are not subject to VAT. VAT is collected at a standard rate of ten percent (10%) but for some services, the VAT effective rate is one percent (1%). For export of goods, the VAT is zero. Starting April 2010 the new VAT Law is effectively applied. In this new law export of service is also subject to 0% VAT providing that the service is adhere to a product e.g., maklon service. The tax authority is yet to issue the implementation regulation of this law.
Taxpayers are required to file returns with details of all output and input VAT in the month following. The net output VAT is then payable by the 15th of the month following and the monthly VAT report must be filed by the 20th. An excess of input VAT may be carried forward. Refunds may be applied for in the case of chronic overpayments. Suppliers who trade with so called “VAT collectors” will not collect VAT from their customers or clients. The VAT is then paid directly to the State Treasury. Such suppliers may be in a constant overpayment situation and have to seek regular refunds. VAT has become a major source of revenue for the government.
1) General transactions
On general transactions, the tax rate of 10% shall be imposed on supply of goods under the following circumstances:
- The tangible goods supplied are taxable goods.
- The intangible goods supplied are taxable goods.
- The supply is carried out within the customs area.
- The supply is conducted in the course of business or work of the firm concerned.
2) Zero-rated transactions
The Value Added Tax rate on the export of taxable goods is zero percent (0%) as well as export of the service that adhere to a product..
3) Exempt transactions
Types of goods that are not subject to Value Added Tax shall be based on the following categories:
- Products of mining and drilling, taken directly from the source.
- Daily necessities needed by the public.
- Food and beverages served in hotels, restaurants and other such places including food and beverages take away and deliver by the catering provider
- Money, gold and valuable documents.
The determination of types of services that are not subject to Value Added Tax shall be based on the following fields of activity:
- Social welfare
- Postal delivery
- Financial service
- Insurance service
- Culture and entertainment that has been subject to entertainment tax
- Broadcasting, not including advertising
- Shipping and inland public transportation
- Rendering of services by the government in efforts to run the governance in general
- Public phone which using coin
- Money delivering using Wessel post
Most duties are in the 5% to 40% range. The minimum rate is 0% and the maximum rate is 150%. Indonesia has no rules for insubstantial (minor) imports of goods and services. VAT and customs duty will be imposed on all goods irrespective of their value. Likewise VAT will be imposed on the import of services irrespective of value. No changes are foreseen in this area despite the fact that the availability of e-commerce transactions will lead to an increase in low value cross-border trade.
Acquisition tax is payable on the acquisition of rights to property (land and buildings), and the tax tariff is stipulated at 5%.
Property and Land tax
Tax is imposed on individuals, companies or organizations that have certain rights to or obtain benefits from land, or possess, control or obtain benefits from ownership of land and buildings. The tax is based on the sales value of the land and buildings as determined by the Ministry of Finance. Land value is reassessed every three years in most areas and every year in rapidly developing areas. The current effective tax rate on land and buildings is 0.5% of the sales value.
Sales Tax on Luxury Goods
Sales taxes also include sales tax on luxury goods (PPnBM). This tax applies at the point of import or manufacture and is additional to VAT. It is a non-creditable, one-off tax and applies to a wide range of goods. Rates range from 10 percent to 75 percent.
Government Regulation No. 145/2000 dated 22 December 2000 as latest amended by Government Regulation No. 12/2006 dated 15 April 2006 details various goods subject to Sales Tax at rates ranging from 10% to 75%. It is apparent that the Sales Tax base has been broadened. In addition, the rate applicable to many types of goods has been increased. For example:
- Housing with floor space over 400m2 or electricity usage of more than 6,600 Watts, apartments, condominiums and town houses are now subject to 20% (previously 10%).
- Perfume is subject to 20% (previously 10%).
- Helicopters and aircraft are now subject to 50% (previously 35%).
The maximum rate of Sales Tax has increased to 75%. Examples of goods subject to this maximum rate are:
- Sedans/ station wagons/ vans with spark or compression ignition internal combustion reciprocating piston engines exceeding 3,000 cc with seating capacity of less than ten persons
- Certain types of liquor and wine
- Luxury yachts
- Jewelry and anything made from precious stones or pearls
Special Industry Rules
Certain industries, in particular production sharing contractors, mining companies under contracts of work and geothermal projects are subject to income tax in accordance with special “lex specialist” rules. Rates of tax vary according to the generation of each respective contract.