Value-added tax (VAT)
With a few exceptions, VAT is applicable on deliveries (sales) of goods and services within Indonesia at a rate of 10%. VAT on export of goods is zero-rated, while the import of goods is subject to VAT at a rate of 10%. Zero-rated VAT is also applicable on exported services, but subject to a Ministry of Finance (MoF) limitation. The range of services subject to 0% VAT has been expanded as of 1 April 2019 as follows:
- 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
- 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.
Services performed within the Customs Area for customers outside of the Customs Area are considered as locally delivered and are therefore subject to the regular VAT rate of 10%. Inbound use or consumption of foreign services or intangible goods, with a few exceptions, is also subject to a self-assessed VAT at a rate of 10%.
Starting 1 July 2020, the utilisation of foreign intangible goods and services provided via e-commerce system to users in Indonesia’s Customs Area will be imposed with a VAT rate of 10%.
After the Omnibus Law entered into force on 2 November 2020, the delivery of taxable goods on consignment as well as inbreng (i.e. transfer of taxable goods for the purpose of capital deposit in lieu of shares) become non-VATable goods. On the contrary, coal products become VATable goods.
The VAT law allows the Government to change the VAT rate within the range of 5% to 15%. However, since the enactment of the VAT law in 1984, the Government has never changed the VAT rate.
In general, VAT collection is based on the accrual principle, whereby VAT must be collected at the time of delivery of taxable goods or services. The term delivery, in this case, is defined as the time when risk and ownership of goods have been transferred or when income from a service delivery can be reliably estimated or measured. In the accrual system, income or receivables are acknowledged when a transaction takes place, regardless of whether the transaction has been paid for or not. The recognition of revenue or receivables is indicated by the issue of a commercial invoice, which is a source document for this recognition and a basis for recording it.
VAT filing is done on a monthly basis, with payment and filing being due no later than the last day of the month following the taxable delivery.
Luxury-goods sales tax (LST)
In addition to VAT, some goods (e.g. motor vehicles, luxury residences) are subject to LST upon import or delivery by the manufacturer to another party at rates currently ranging from 10% to 125%.
Import duty is payable at rates from 0% to 150% on the customs value of imported goods. Customs value is calculated on the cost, insurance, and freight (CIF) level.
|Automobiles||Passenger and commercial||5 to 50|
|Automobile components||Incompletely knocked down||0 to 7.5|
|Part by part||0 to 10|
|Vessels||Ships, boats, and floating structures||0 to 5|
|Aircraft||Balloons, helicopters, aeroplanes, parachutes, and aircraft launching gear||0|
|Electronic goods||Camera, refrigerator, cellular phone, and others||0 to 15|
|Textile, textile products, and accessories||Bags, footwear, harnesses, apparels, clothing accessories, etc.||5 to 35|
|Beverages, ethyl alcohol, and alcoholic drinks||Ethyl alcohol, juice, beer, wine, spirits, and other beverages||5 to 150, or IDR 14,000/litre|
|Essential oils and resinoids||Odoriferous substances||5 to 150|
|Agricultural products||Animal and vegetable products||0 to 30|
|Furniture||Bedding, mattresses, lamp and lighting fittings, and others||5 to 20|
|Toys||Toys, games and sport requisites, parts and accessories thereof||5 to 20|
|Plastic||Plastics and articles thereof||0 to 25|
|Rubber||Rubber and articles thereof||0 to 15|
|Wood||Wood and articles thereof||0 to 25|
|Steel||Steel and articles thereof||0 to 20|
|Others||Chemicals, pharmaceutical products, works of art, arms and ammunition, musical instruments, and others||0 to 40|
As a commitment to liberalising trade, the Indonesian Government is progressively lowering import duty rates on most products. Higher duty rates remain to protect certain industries and goods regarded as sensitive for security or social and cultural reasons.
The Indonesian Government offers duty relief, duty exemption, and duty deferral concessions to foreign and domestic investors in order to promote the development of local and export industries. These concessions usually combine with other tax facilities, such as VAT and income tax. Such concessions include the Badan Koordinasi Penanaman Modal (BKPM) Masterlist, Bonded Zone, Bonded Warehouse, import duty exemption and drawback for exports, Free Trade Zone (FTZ), Association of Southeast Asian Nations (ASEAN) duty rates, Free Trade Area (FTA) agreement duty rates with several countries, Indonesia-Japan Economic Partnership Agreement (IJEPA), MITA (main partners) lanes, and Authorised Economic Operator. Certain entities that import goods related to R&D activities can also be granted with import duty and/or excise exemptions.
Land and buildings tax
Land and buildings tax (Pajak Bumi dan Bangunan or PBB) is a part of regional taxes, which are governed under Regional Taxes and Retribution (Pajak Daerah dan Retribusi Daerah or PDRD) Law in which each regional Government has to issue a regulation (Peraturan Daerah or PERDA) to regulate PBB in its territory.
The scope of PBB under PDRD Law covers all land and buildings except for the following industries, which are governed by separate regulations:
- Mineral and coal mining.
- Oil, gas, and geothermal mining.
- Other industries located in national waters outside the territory of the regional area.
Under PDRD Law, the PBB rate is maximum 0.3% and the tax due is calculated by applying the tax rate on the sale value of the tax object (Nilai Jual Objek Pajak or NJOP) deducted by non-taxable NJOP. The non-taxable NJOP is set at a minimum of IDR 10 million. Any changes are to be made by issuing a PERDA.
Tax on land and buildings transfer
A transfer of land and buildings will cause income tax on the deemed gain on the transfer/sale to be charged to the transferor/seller. The tax is set at 2.5% of the gross transfer value or the Government-determined value, whichever is greater (see Final income tax in the Taxes on corporate income section).
Duty on the acquisition of land and building rights
In a land and building transfer, the acquirer is liable for duty on the acquisition of land and building rights (Bea Pengalihan Hak atas Tanah dan Bangunan or BPHTB) at a maximum of 5% of the greater of the transaction value or the Government-determined value. Similar to PBB, BPHTB has been made a part of regional taxes.
Stamp duty is nominal and payable as a fixed amount of either IDR 10,000 on certain documents.
There are no additional payroll taxes applicable other than those for social security contributions (see below) and employee income tax withheld by employer on the salary payment.
Social security contributions
Employers are responsible for ascertaining that their employees are covered by the workers social security program managed by Badan Penyelenggara Jaminan Sosial (BPJS), which provides working accidents protection, death insurance, old age savings, health care, and pension. The program calls for premium contributions from both the employers and the employees. Employees’ contributions are collected through payroll deductions. The premium contributions borne by employers are calculated as a percentage of regular salaries/wages, ranging from 0.24% to 4%. The scheme applies to all employees, including expatriates who have been working in Indonesia for more than six months.
The new Omnibus Law introduces a new type of social security contributions, namely Unemployment Insurance which implementation is still subject to further regulation. See Unemployment insurance in the Individual - Other taxes section for a description of the unemployment insurance.
Public housing savings
The purpose of public housing savings (Tabungan Perumahan Rakyat) is to collect and provide long-term sustainable low-cost funds for housing finance in order to meet the needs of decent and affordable housing for Participants. Deposits contributions are paid by employees and employers based on a certain percentage of wages i.e. 0.5% for employer and 2.5% for employee or 3% for independent workers.
The scheme applies to employees and independent workers who work and receive wages or rewards at least a minimum wage amount and at least 20 years old or has been married at the time of registering, including both Indonesian citizens and expatriates, who holds working visas and have been working for a minimum of six months in Indonesia.
Sanctions apply for non-compliant employers and independent workers who do not follow the Government provisions.
A corporate taxpayer may be liable for a number of regional taxes and retributions. The rates range from 1.5% to 35% of a wide number of reference values determined by the relevant regional Governments. The following are regional taxes, other than PBB and BPHTB, that may apply:
- Motor vehicle tax.
- Motor vehicle ownership transfer fee.
- Motor vehicle fuel tax.
- Surface water tax.
- Cigarette tax.
- Hotel tax.
- Restaurant tax.
- Entertainment tax.
- Advertisement tax.
- Road illumination tax.
- Non-metal and rock minerals tax.
- Parking tax.
- Ground water tax.
- Swallow-nest tax.