ABSTRACT
The Law on Harmonization of Tax Regulations Number 7 of 2021 (UU HPP) stipulates an adjustment to the Value Added Tax (VAT) rate to 12% in 2025. As an implementation of this policy, Regulation of the Minister of Finance Number 131 of 2024 (PMK 131/2024) was issued to regulate the VAT treatment of imports, delivery of taxable goods (BKP), and delivery of taxable services (JKP). This policy aims to create a fair taxation system, support inclusive economic growth, and maintain the stability of prices for people’s basic necessities. In this PMK, there are regulations regarding the VAT rates applied to luxury BKP, non-luxury BKP, and JKP, with the calculation of DPP of other values, as well as special provisions for the delivery of luxury goods during the transition period of January 2025.
Based on the Harmonization of Tax Regulations Law No. 7 Year 2021 (HPP Law), the value added tax (VAT) rate will be adjusted to 12% in 2025. In connection with the implementation of the HPP Law related to the adjustment of the VAT rate and considering the aspects of fairness to the citizen related to the policy of application of the VAT rate, the Minister of Finance of the Republic of Indonesia issued Minister of Finance Regulation No. 131 Year 2024 (PMK 131/2024) concerning VAT Treatment of Imports of Taxable Goods (BKP), Delivery of Taxable Goods (BKP), Delivery of Taxable Services (JKP), Utilization of Intangible Goods (BKP) from Outside the Customs Area within the Customs Area, and Utilization of JKP from Outside the Customs Area within the Customs Area on December 31, 2024.
The rate adjustment as stipulated in MoF Regulation No. 131/2024 reflects the Government’s commitment to manage a fair and balanced tax system, while at the same time supporting inclusive economic growth and ensuring price stability for the public’s basic needs. With the implementation of this policy, it is expected to create fiscal stability and a sustainable national economy. The effective rate of 11% is expected to reduce the tax burden on the general public, without compromising the principle of tax contribution.
The following are some of the key provisions related to the adjustment of VAT rates contained in MoF Regulation No. 131/2024:
- Taxable Entrepreneurs who import taxable goods and/or deliver taxable goods within the customs area which are classified as luxury goods in the form of motor vehicles and other than motor vehicles subject to the Luxury Goods Sales Tax (PPnBM), are subject to VAT by multiplying the rate of 12% (twelve percent) by the taxable base (DPP) in the form of selling price or import value.
- Import and/or delivery of taxable goods within the customs area by Taxable Entrepreneurs other than taxable goods classified as luxury in point 1 above, delivery of taxable services within the customs area by an Entrepreneur, utilization of intangible taxable goods from outside the customs area within the customs area, utilization of taxable services from outside the customs area within the customs area, are subject to VAT by multiplying the rate of 12% (twelve percent) by the taxable base in the form of other value. The other value is calculated at 11/12 (eleven twelfths) of the import value, selling price, or replacement.
- Taxable Entrepreneurs who use taxable base in the form of other values and a certain amount, are subject to VAT by multiplying the rate of 12% (eleven twelfths) with taxable base in the form of other values in accordance with the laws and regulations in the field of taxation separately.
Since MoF Regulation No. 131/2024 was issued at the end of 2024, the Taxable Entrepreneurs who deliver taxable goods classified as luxury in the form of motor vehicles and other than motor vehicles subject to Luxury Goods Purchase Tax to buyers with the characteristics of end consumers, the special provisions in MoF Regulation No. 131/2024 apply, namely:
- Period January 1 – January 31 2025
VAT is calculated by multiplying the 12% rate by the taxable base in the form of other value of 11/12 of the selling price;
- Starting from February 1, 2025
VAT is calculated by multiplying the 12% rate by the taxable base in the form of selling price or import value.
Example of VAT calculation
- Delivery of taxable goods that are not luxury goods and taxable services with an effective rate of 11% using the mechanism of taxable base in the form of other value of 11/12:
• Submission Value = IDR 1.000.000
• Taxable base of Other Value (11/12 x IDR 1.000.000) = IDR 916.667
• VAT Payable = IDR 110.000
Thus, the VAT payable is IDR 110,000, which is equivalent to an effective rate of 11% of the selling price of IDR 1,000,000.
- Delivery of taxable goods/services using a certain amount of taxable base, which is regulated by separate tax laws and regulations, is exempted from the taxable base of other values in accordance with MoF Regulation No. 131/2024 (11/12 of the selling price or replacement). Delivery of taxable goods/services using a certain amount of taxable base includes:
- Package delivery services in the postal sector
- Travel agency and travel agent services
- Freight forwarding services
- Services for organizing religious trips
- Services for organizing voucher media marketing
- Delivery of foreclosed collateral
- Delivery of gold jewelry by gold jewelry manufacturers
- Self-building activities
- Delivery of certain agricultural products
- Delivery of used motor vehicles
- Insurance agency services
- Insurance and reinsurance brokerage services
- Services for providing electronic facilities in crypto asset trading
Example of calculation of VAT submission with a certain amount for freight forwarding services:
PT X is a business engaged in transportation management services, getting an order from PT Y with a transaction value of IDR 100,000,000.
Tax base of a certain amount = 10% x Bill Amount
= 10% x IDR 100.000.000
= IDR 10.000.000
So, the amount of VAT that must be paid is:
VAT Payable = VAT rate x Taxable base
= 12% x IDR 10.000.000
= IDR 1.200.000
Thus, the VAT payable is IDR 1,200,000, which is equivalent to a rate of 1.2% of the value of the freight forwarding fee.
- Delivery of taxable goods/services using taxable base of other value, which is regulated by separate tax laws and regulations, is exempted from taxable base of other value in accordance with MoF Regulation No. 131/2024 (11/12 of the selling price or replacement). Delivery of taxable goods and services using taxable base of other value includes:
- Self-use of taxable goods and/or taxable services
- Delivery of movie/story
- Delivery of tobacco products
- Taxable goods in the form of inventories and/or assets which according to the original purpose are not intended for sale and purchase
- Delivery of taxable goods from head office to branch or vice versa
- Delivery of taxable goods through broker
- Delivery of taxable goods through an auctioneer
- Delivery of liquefied petroleum gas (specified for the price which is not subsidized)
Example of VAT calculation with taxable base of other value for delivery of taxable goods from head office to branch or vice versa:
Delivery of taxable goods from head office to branch amounting to IDR 120,000,000, where the cost or acquisition price of the taxable goods is IDR 100,000,000.
• Submission Value = IDR 120.000.000
• Taxable base of Other Value (as per COGS/acquisition cost) = IDR 100.000.000
• VAT Payable (12% x IDR 100.000.000) = IDR 12.000.000
Furthermore, to accommodate the needs of business entities, Director General of Taxes Regulation Number PER-1/PJ/2025 dated January 3, 2025 has been issued regarding technical guidelines for the issuance of tax invoices in implementing MoF Regulation No. 131 Year 2024.
Business entities are given the opportunity to adjust the taxpayer administration system in issuing Tax Invoice as stipulated in MoF Regulation No. 131 Year 2024. Tax invoices issued for deliveries other than luxury goods during the 3-month transition period from January 1, 2025 to March 31, 2025 are considered correct and are not subject to sanctions by stating the value of VAT payable in the amount of:
- 11% multiplied by the selling price (should be 12% x 11/12 x selling price); or
- 12% multiplied by the selling price (should be 12% x 11/12 x selling price).
In case of an excess VAT collection of 1% of what should be 11%, but has already been collected at 12%, the following arrangements are provided:
- The buyer may request a refund of the excess VAT collection of 1% to the seller.
- Upon the request for a refund of the excess VAT, the seller Taxable Entrepreneur shall replace the Tax Invoice. The buyer may request a refund of the excess VAT collection of 1% to the seller.
