Indonesia’s standard VAT rate rose to 12% in January. This adjustment targets luxury goods and services while maintaining exemptions for essentials like staple foods and healthcare.
For businesses, this change represents both a compliance challenge and an opportunity to reassess strategies for managing costs and maximizing efficiency.
Here’s what is taxable and what is not:
- Standard rate (12%): This applies to luxury goods and services, including private jets, yachts, exclusive memberships, and premium travel packages.
- Zero-rated goods: Exports benefit from a zero-tax rate to boost international trade competitiveness.
- Exemptions: Necessities, public transport, and essential healthcare services are VAT-exempt, reflecting a commitment to social welfare.
Exports of goods and certain services are zero-rated for VAT purposes. This means businesses do not charge VAT to foreign buyers, making exports more competitive in the global market. However, exporters must meet strict requirements to qualify for zero-rating, including:
- Export documentation: Accurate records, including export declarations, invoices, and proof of delivery, are mandatory to substantiate zero-rated VAT claims.
- Compliance with customs procedures: Delays or errors in customs processes can impact the ability to claim zero-rated VAT.
- Refund process: Exporters may be eligible for VAT refunds on input tax paid during the production of goods and services for export. However, the process can be lengthy and requires meticulous documentation.
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