Indonesia VAT: Bill to amend VAT law passed

The Indonesian House of Representatives on 16 September 2021 passed a long-awaited bill that will amend the VAT Law.

The bill, which now awaits the President's signature and enactment, is expected to become effective as from 1 April 2010, giving the Director General of Taxation time to prepare implementing guidance and publicize the law.

Some of the major changes to the VAT law include the following:
- The export of services and intangible goods will be subject to a 0% VAT rate. The Ministry of Finance will be issuing regulations to set limits on exports of services and intangible goods that are subject to the 0% rate.
- Financial services, including Shariah-compliant businesses, will not be subject to VAT.
- The transfer of VATable goods by an entrepreneur registered for VAT purposes regarding financial services based on Shariah will be included within the scope of a transfer of goods subject to VAT.
- The transfer of goods in a merger, liquidation, spin-off or acquisition will not be deemed to be a transfer subject to VAT if both parties are registered as VAT taxpayers. Currently, such transactions are subject to VAT.
- The Luxury Goods Sales Tax rates will be set at a minimum of 10% and a maximum of 200%.
- VAT invoicing requirements as stated in the VAT Law will have to be met.
- VAT refund claims will be permitted only at the end of a tax year, although certain entrepreneurs registered for VAT will be allowed to claim tax refunds on a monthly basis. However, entrepreneurs that are in the preproduction stage and that fail to commence production within three years from the date input VAT is credited will have to repay VAT that has been refunded.
- VAT invoices will have to be issued at the time of payment of taxable goods and/or services or the delivery of goods/services, whichever is earlier. VAT invoices currently can be issued no later than the end of the following the month after goods are delivered and/or services are provided, or at the time of payment if payment is made before the goods are delivered or services provided.
- Any underpayment of VAT should be made before the VAT return filing deadline (i.e. no later than the end of the following month) or before reporting the VAT return. Currently, VAT underpayment should be paid no later than the 15th of the following month and the VAT return should be filed no later than the 20th of the following month. The changes to the VAT law will have mixed effects on taxpayers: some of the provisions benefit taxpayers in terms of more clarity and facilities, but others impose additional administrative burdens.


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