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VAT, or value-added tax, is a type of indirect tax that is levied on the consumption of goods and services in Indonesia. It is an important source of revenue for the government and affects the prices of goods and services for consumers and businesses.
For foreign-owned businesses that operate in Indonesia, VAT registration is mandatory for some businesses based on their revenue, but it also offers many benefits for those who register voluntarily.
In this article, we will explain the basics of VAT in Indonesia, the rates and exemptions, and the steps to register for VAT as a foreign-owned business.
Understanding VAT in Indonesia: Rates, taxable and non-taxable goods/services
Before registering for VAT in Indonesia, it is important to understand how VAT works and what are the applicable rates and exemptions. VAT is a consumption tax that is imposed on the delivery of taxable goods and services within the Indonesian Customs Area.
Following are the VAT rates in Indonesia.
| Category | VAT rate |
|---|---|
| Manufacturers, retailers, wholesalers, and importers | 11 % (Since April 2022) and 12 % (By 2025) |
| E-commerce entities (Merchants, E-commerce organizers, and Intermediary Service Organizers) | 11% |
| Export of tangible/intangible goods | 0% |
| Export of services | 0% |
Taxable goods and services in Indonesia
Goods that are subject to VAT in Indonesia include the following.
- Appliances and electronics (TVs, refrigerators, air conditioners, washing machines, smartphones, laptops)
- Vehicles and automotive parts (cars, motorcycles, spare parts, tires, batteries)
- Furniture and home decor (sofas, tables, chairs, beds, lamps)
- Clothing and accessories (apparel, shoes, bags, jewelry)
- Construction materials (cement, steel bars, bricks, tiles, paint)
- Health and wellness products (vitamins, supplements, medical equipment)
- Books, magazines, and newspapers
Taxable services in Indonesia
Services that are subject to VAT in Indonesia include:
- Import of taxable goods
- Delivery of taxable services or import of goods into a customs area
- Export of taxable goods by a VAT-registered entity
Non-taxable goods in Indonesia
Goods that are not subject to VAT in Indonesia include the following.
- Food and beverages served in restaurants and hotels
- Products obtained from drilling or mining (natural gas, crude oil, coal, gold ore, iron ore, copper ores)
- Commodities (rice, eggs, milk, fruit, tubers, meat, sugar, soybeans, salt)
- Gold bars and money used for government forex reserves
Non-taxable services in Indonesia
These include the following:
- Religious services
- Entertainment, hotel, parking, catering, and art services
- Educational services
- Medical and health services
- Public transportation services
- Financial services
- Labor services
How to register for VAT in Indonesia
Registering for VAT in Indonesia is an important step for businesses that have reached the annual turnover threshold, which currently stands at IDR 4.8 billion per year. It helps investors comply with VAT regulations and ensures proper tax collection and payment to the Indonesian tax authorities.
Emerhub assists you every step of the way in registering for VAT in Indonesia. Our dedicated team of experts guides you through the requirements, document preparation, and application submission, and ensures compliance with VAT regulations.
VAT thresholds and requirements for registering VAT in Indonesia
In Indonesia, the registration for VAT is subject to certain thresholds and requirements.
Annual turnover
One of the key factors determining VAT registration is the annual turnover of a business. If your business has an annual turnover exceeding IDR 4.8 billion per year, you are obligated to register for VAT in Indonesia.
This threshold ensures that larger businesses actively participate in the VAT system.
Voluntary registration
Even if your business does not meet the mandatory turnover threshold, you have the option to register for VAT voluntarily. This is advantageous for businesses that deal with VAT-registered customers or suppliers.
Voluntary registration allows you to claim input VAT on your purchases, which improves your competitiveness and profitability.
Other requirements
Other important requirements include the following.
- Businesses must obtain a Taxpayer Identification Number (NPWP) before registering for VAT.
- Legal documentation proving the establishment of the business entity is required for VAT registration. This includes the company’s articles of association and a deed of establishment.
- Identification documents of the business owner or authorized representative, such as a valid identity card (KTP) or passport, must be submitted for VAT registration.
- Businesses need to provide the bank account details of their company, including the bank name, account number, and branch.
- Documentation demonstrating the business’s domicile or registered address is required. This includes a lease agreement and a utility bill.
Step-by-step process to register for VAT in Indonesia with Emerhub
VAT registration is an essential requirement for businesses operating in Indonesia. This process ensures compliance with tax regulations and enables businesses to participate in the country’s VAT system.
Step 1: To initiate the VAT registration process, Emerhub submits an application to the tax authorities. The application form is obtained from the local tax office or through the online portal. Emerhub accurately fills out the form, providing all the required information about your business.
Step 2: Emerhub collects and submits the necessary paperwork, including the company’s establishment deed, taxpayer identification number (NPWP), business licenses, and articles of association.
Step 3: Once the application and supporting documents are submitted, the tax authorities review them. If everything is in order, the tax authorities approve the application.
Step 4: Upon approval, the tax authorities issue a VAT identification number to your business. This unique identifier is essential for all future VAT-related transactions and reporting. Additionally, a VAT registration certificate is provided, confirming your business’s successful registration for VAT.
Step 5: Once a business is registered for VAT in Indonesia, Emerhub takes care of filing its VAT returns. Businesses with higher turnovers, which refer to annual revenue surpassing IDR 4.8 billion, are obligated to file their VAT returns monthly. On the other hand, those with lower turnovers, indicating annual revenue below this threshold, typically file them quarterly.
In addition to handling the filing process, Emerhub also ensures the timely remittance of the VAT collected from customers to the tax authorities.
Registering for VAT in Indonesia made easy with Emerhub
Emerhub’s tax and accounting professionals offer comprehensive support for businesses navigating the complex VAT process in Indonesia. We assist in determining VAT registration thresholds, ensuring accurate invoicing and reporting, managing VAT payments, and preparing for audits and inspections.
With our expertise, businesses successfully implement and comply with VAT regulations, freeing up time to focus on growth.
