Business owners in Indonesia must be fully aware of the VAT system as it affects their business activities all over the country. There are 3 components for VAT:
1. VAT Collection
VAT collection is based on the accrual principle which states that VAT must be collected at the time of delivery of taxable goods and services. Delivery refers to the transfer of ownership and risks of goods and takes place when service delivery income can be reliably measured.
Income or receivables are acknowledged when a transaction occurs even if a payment has not yet been received. Recognition of revenue or receivables is acknowledged by the issuance of a commercial invoice, which serves as a source document for this recognition and a basis for its recording.
2. VAT Filing
VAT filing in Indonesia is to be completed monthly. The payment must be made, and filing must be done on or before the last day of the month following the taxable delivery.
According to the Directorate of General Taxes, tax bases may include any of following:
20% of total land costs,
transaction market value agreed upon between parties,
the agreed price of a delivery of taxable goods,
the auction price of a delivery of taxable goods delivery,
10% of the billing price of deliveries of freight forwarding,
20% of the selling price of deliveries of gold jewellery,
the retail selling prices of tobacco products upon either import or delivery,
the cost of sales of taxable goods to be used internally or as gifts,
imported movies worth at least 12 million rupiah, or
10% of the billing price of non-commission-based deliveries conducted by tourism agency services
3. VAT Refunds
VAT refunds may also be claimed in Indonesia. It is the sole responsibility of the Directorate of General Taxes to make decisions regarding VAT refunds. Such decisions usually depend on the VAT audit which is conducted within 12 months of receipt of refund applications.
Applications may also be approved if there are no decisions made by the DGT. After the application, companies are then required to submit supporting documents within a month to the Directorate of General Taxes.