One of business owner’s biggest concerns when they set up a company in Indonesia is ensuring they adhere to the correct working practices and that means paying the correct taxes and VAT.
Many new business owners ask whether or not they need to register for VAT and this depends on a few different factors; but before we get there, lets clarify what it is and who it is relevant too.
Value Added Tax (VAT) is a tax imposed on most goods and services within Indonesia. The standard VAT rate is 10%; however, some goods and services are charged at different rates ranging from 5 – 15% in accordance with Indonesian Regulations.
It should be noted that Indonesia levies a separate GST on the sale of luxury items which ranges between 10% and 50%.
In general, your business is required to become VAT registered when it reaches an annual revenue of 4.8 billion IDR (Approx. 360,000 USD).
As well as different VAT rates, some business services are subject to 0% VAT, which as of 1st April 2019 includes:
Services connected to movable goods, utilised outside of the Customs Area that comprise:
–Toll manufacturing services
–Repair and maintenance services, and
–Freight forwarding services on export-oriented goods.
Services connected to immovable goods located outside of the Customs Area in the form of consultation services for construction.
Other services where the output is utilised outside of the Customs Area and utilisation is based on a request from an overseas recipient. These services comprise:
–Information and technology services
–Inter-connection, satellites, and/or data connectivity services
–Research and development (R&D) services
–The rental of aircraft and/or ships for international flight for shipping activities
–Trading services that assist in finding domestic sellers to procure goods for export purposes, and
–Certain consultation services, accounting services, financial audit services, and tax services, among others.
If your company is considered as Pengusaha Kena Pajak (PKP) you must report your VAT related business activity monthly.
Companies with several branches must register each branch with the Kantor Pelayan Pajal (KPP).
The steps involved during the VAT Registration process are:
1. Submit the required VAT Documents to the Tax Office
2. Collect the VAT Certificate
3. Submit for VAT account
4. VAT account (username and password) will be sent through the email
The approximate time to register is about 15 working days.