Discover key changes in Indonesian labour law following the Constitutional Court's October 2024 ruling. Learn how to stay compliant with hiring, contracts, and outsourcing.
Value Added Tax (VAT) in Indonesia is a consumption tax applied at each stage of the supply chain, where value is added to a product from production to the final sale. It applies to many goods and services traded within the Indonesian Customs Area.
Companies in Indonesia must register as VAT taxpayers if their business is subject to VAT and their annual revenue exceeds IDR 4.8 billion. They must complete the registration by the end of the fiscal year in which they surpass the revenue threshold. Additionally, businesses can deregister as VAT taxpayers if their revenue falls below IDR 4.8 billion for at least two consecutive years.
Indonesia’s planned VAT increase to 12% in January 2025 is part of the government’s broader fiscal reforms under the Harmonization of Tax Regulations Law (HPP). Law Number 7 of 2021 on the HPP Law dictated that the VAT would increase from 10% to 11% in 2022, and then from 11% to 12% in January 2025.
The aim of the VAT hike is to boost state revenues and ensure fiscal stability, however it will impact businesses and consumers alike. This VAT increase in Indonesia in 2025 will automatically apply to all sales and imports of goods and services subject to VAT. Significant areas affected by this change in the tax rate include self-construction activities, trading crypto assets, and taxable services (including ours).
Minister of Finance Regulation Number 61/PMK.30/2022 details the specifics of VAT on self-construction activities. Article 3 of this regulation states that VAT for self-construction is calculated by multiplying 20% of the base amount by the current VAT rate.
For example, at the current 11% VAT rate, the applicable rate is 2.2%. When the VAT rate increases to 12% in January, the applicable rate will rise to 2.4%. Essentially, this is an adjustment to the existing structure, not a new tax.
This VAT applies to buildings that exceed 200 square meters (m2) either at initial build or within 2 years of completion. For example, if you finish building a 150m2 first floor and a 30m2 second floor home in January 2025, no Self-Construction VAT applies. However, if you build a 100m2 pool in December 2027, within the 2-year window, a 2.4% VAT applies. If you were to wait until January 2028 to build the 100m2 pool, the 2.4% VAT would not apply.
In Indonesia, authorities officially implemented VAT and Income Tax regulations on the trading of crypto assets in May 2022.
Crypto assets in Indonesia are classified as commodities, not currency or securities. As a result, authorities treat crypto trades similarly to other goods subject to VAT. The government imposes VAT only on transactions conducted on official crypto exchanges registered with the Commodity Futures Trading Regulatory Agency (BAPPEBTI).
The VAT rate for crypto assets is significantly lower than the general VAT rate. This provides a concession for the crypto industry. Exchangers registered with the BAPPEBTI currently apply a 0.11% VAT to crypto asset trades. However, this rate will increase to 0.12% in January 2025.
For a full list of VAT rates on crypto exchanges, please see the table below.
Not all companies in Indonesia are required to charge VAT. VAT obligations arise only when the delivery of taxable goods or services exceeds the threshold of IDR 4.8 billion in gross revenue per year. However, companies can choose to register as a VAT taxpayer before reaching this threshold for tax benefit reasons. Businesses mainly working with VAT taxpayers may benefit from early registration. This allows them to credit VAT charged against the VAT collected from clients.
Below is a complete list of goods and services that will be affected by the increase of the VAT rate in 2025.
| Sector | 2025 VAT Calculation formula with certain amounts, when the applicable VAT is 12% | Legal Basis |
|---|---|---|
| Self-Building Activities | 2.4% x tax base | PMK 61/2022 |
| Liquid Petroleum Gasoline at the agent or base delivery point | Agent drop off point: 1.2% x agent selling price/retail selling price | PMK 62/2022 |
| Base drop off point: 1.2% x base selling price/agent selling price | ||
| Certain Agricultural Products | 1.2% x selling price | PMK 64/2022 |
| Used Motor Vehicles | 1.2% x selling price | PMK 65/2022 |
| Insurance Agent Services, Insurance Broker Services, and Reinsurance Broker Services | Insurance Agent Services: 1.2% x commission or fee Insurance/Reinsurance Brokerage Services: 2.4% x commission or fee | PMK 67/2022 |
| Trading Crypto Assets | Crypto Trading Transactions: - 0.12% x crypto asset transaction value (if the exchanger is registered with BAPPEBTI) - 0.24% x transaction value of crypto asset (if the exchanger is not registered with BAPPEBTI) Transaction Verification Service (Mining): 1.2% x value in the form of money for crypto assets received | PMK 68/2022 |
| Certain Taxable Services | Package delivery service: 1.2% x replacement value | PMK 71/2022 |
| Travel agency services and/or travel agent services: 1.2% x the sale price of the tour package, means of transportation, and accommodation | ||
| Transportation management services (freight forwarding): 1.2% x the amount billed or the amount that should be billed | ||
| Religious pilgrimage service that also organizes travel to other places: - 1.2% x the sale price of the travel package to other places (if the bill is detailed) - 0.6% x the total price of the travel package (if the bill is not detailed) | ||
| Organization services: marketing with vouchers: 1.2% x voucher selling price | ||
| Transfer of Collateral Taken Over by Creditor to Collateral Buyer | 1.2% x collateral selling price | PMK 41/2023 |
| Sales/Delivery of Gold Jewelry | Factory VAT: - 1.2% x selling price (for handover of self-produced gold jewelry to other manufacturers or traders) - 1.8% x selling price (for handover of self-produced gold jewelry to end consumers) Trader VAT: - 1.2% x selling price (handover to other traders or end consumers in the case that the VAT has a complete tax invoice for the acquisition of gold jewelry and/or certain documents) - 1.8% x selling price (handover to other traders or end consumers in the case that the VAT does not have a complete tax invoice) - 0% x selling price (for handover to manufacturers) | PMK 48/2023 |
Want to know more about the VAT increase or how it affects your business? Our team of tax specialists can help you apply and declare your VAT obligations effectively. Book a consultation with our tax experts today.
Discover key changes in Indonesian labour law following the Constitutional Court's October 2024 ruling. Learn how to stay compliant with hiring, contracts, and outsourcing.
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