VAT (Value Added Tax) is a tax imposed on domestic consumption by the individual, corporate, and government taxpayers. In its application, the Corporate or Individual who pays this tax is not required to deposit it directly to the state, but through the party who withholds/collects VAT.
Value Added Tax is objective, not cumulative, and is an indirect tax. The tax subjects consist of Taxable Entrepreneurs (PKP) and non-PKP.
PKP is obliged to collect, while Non-PKP cannot collect Value Added Tax. But when making transactions for goods/services subject to VAT, you cannot credit the VAT IN
So, VAT is a tax levy that is imposed by Tax on goods buying and selling transactions carried out by individual and corporate taxpayers who have been confirmed as Taxable Entrepreneurs (PKP).
The VAT rate is 10% but starting April 1, 2022, the VAT rate will be adjusted to 11% in accordance with the HPP Law
Through Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP), the government will increase the VAT rate in stages, namely 11% starting April 2022 and by 12% in the following years.
In this HPP Law, apart from regulating the rate of Value Added Tax, it also regulates a negative list of goods/services that are not subject to VAT. So that some goods/services that were previously on the negative list will be subjected to VAT.
Certain goods and services that are STILL PROVIDED VAT-FREE FACILITIES include:
- staple goods: rice, grain, corn, sago, soybeans, salt, meat, eggs, milk, fruits, vegetables, and consumable sugar;
- health services, education services, social services, insurance services, financial services, public transportation services, and labor services;
- vaccines, textbooks, and scriptures;
- clean water (including connection/installation fees and fixed load costs);
- electricity (except for households with power >6600 VA);
- simple flats, flats, RS, and RSS;
- construction services for houses of worship and construction services for national disasters;
- machinery, marine fishery products, animal husbandry, seeds/seeds, animal feed, fish feed, feed ingredients, raw hides and skins, raw materials for silver handicrafts;
- petroleum, natural gas (gas through pipelines, LNG, and CNG), and geothermal;
- gold bullion and granule gold;
- weapons/defense equipment and aerial photography equipment.
Certain goods and certain services REMAIN NOT SUBJECT to VAT:
- goods that are objects of Regional Tax: food and beverages served in hotels, restaurants, restaurants, food stalls, and the like;
- services that are objects of Regional Tax: parking space provision services, arts and entertainment services, hotel services, and catering or catering services;
- money, gold bullion for the interest of state foreign exchange reserves, and securities;
- religious services and services provided by the government.
As part of the tax reform, the VAT rate adjustment is also carried out by:
- a reduction in the rate of Individual Income Tax (PPh) on taxable income of IDR 50 million to IDR 60 million from 15% to 5%;
- tax attackers for individual taxpayers micro, small and medium enterprises (MSMEs) with a turnover of up to IDR 500 million;
- final VAT facility with a certain smaller amount, namely 1%, 2%, or 3%;
- accelerated VAT refund services up to IDR 5 billion are still provided.
In addition to tax support, the government through the State Revenue and Expenditure Budget (APBN) will also continue and will strengthen its support in the form of social protection to maintain people’s purchasing power and national economic conditions.
The government will continue to formulate balanced policies to support economic recovery, assist vulnerable and disadvantaged groups, and support the business world, especially small and medium-sized groups, while still paying attention to the health of state finances for a sustainable state life.
Further regulation regarding the Harmonization of Tax Regulations Law (UU HPP) for VAT clusters will be contained in:
- Minister of Finance Regulation concerning Procedures for Appointing a Collector, Collection, Deposit, and Reporting of VAT on the Utilization of BKPTB and/or JKP from Outside the Customs Area within the Customs Area through PMSE;
- Minister of Finance Regulation concerning VAT on Self-Building Activities;
- Minister of Finance Regulation regarding VAT on Certain LPG;
- Minister of Finance Regulation concerning VAT on Delivery of Tobacco Products;
- Minister of Finance Regulation concerning VAT on Delivery of Certain Agricultural Products;
- Minister of Finance Regulation concerning VAT on Delivery of Used Motor Vehicles;
- Minister of Finance Regulation concerning VAT on Subsidized Fertilizer Submission for the Agricultural Sector;
- Minister of Finance Regulation concerning VAT on the Submission of Certain Taxable Service;
- Minister of Finance Regulation concerning Criteria and/or Details of Food and Beverages, Arts and Entertainment Services, Hospitality Services, Parking Provision Services, and Catering or Catering Services, which are not subject to VAT;
- Minister of Finance Regulation concerning the Appointment of Other Parties as Tax Collectors and Procedures for Collecting, Depositing, and/or Reporting Taxes Collected by Other Parties for Transactions on the Procurement of Goods and/or Services through
- Minister of Finance Regulation concerning VAT and PPh on Crypto Asset Trading Transactions
- Minister of Finance Regulation concerning VAT and PPh on the Implementation of Financial Technology
- Minister of Finance Regulation concerning Procedures for Registration and Deletion of NPWP, Confirmation, and Revocation of PKP Confirmation, as well as Withholding and/or Collection, Depositing, and Reporting Taxes for Government Agencies
- Minister of Finance Regulation concerning VAT for the Submission of Insurance Agent Services, Insurance Broker Services, and Reinsurance Broker Services