On 19 August 2019, the Ministry of Finance (MOF) issued MOF Regulation No. 117/PMK.03/2019 of 2019 (Regulation 117), which amends MOF Regulation No. 39/PMK.03/2018 on Procedure for Preliminary Refund of Tax Overpayment (Regulation 39). The aim of Regulation 39 is to provide protection and the procedure for preliminary tax overpayment refunds for taxpayers with certain criteria, taxpayers with certain requirements, and taxpayers that are considered as low risk taxable enterprises (Low Risk Taxable Enterprises). The preliminary VAT overpayment refund is a preliminary refund to a taxpayer of a VAT payment that exceeds the amount of tax payable.

Regulation 39 stipulates that taxpayers that are entitled to preliminary tax overpayment refunds include taxpayers that are considered as Low Risk Taxable Enterprises. Regulation 117 further stipulates the criteria of taxpayers that can be considered as Low Risk Taxable Enterprises.

What The Law Says?

In a Nutshell

Taxable entrepreneurs that carry out certain activities (i.e., export or transfer of taxable tangible/intangible goods and/or services, delivery of taxable goods/services to VAT collectors, delivery of taxable goods/services on which VAT is not collected) and are categorized as 'Low Risk Taxable Enterprises' are entitled to receive preliminary refunds of VAT overpayments on a monthly basis.

Regulation 117 added pharmaceutical companies as tax entrepreneurs that are entitled to receive preliminary refunds of VAT overpayment, as follows:

  1. Pharmaceutical wholesalers that hold: (i) a Pharmaceutical Distribution Certificate (also known as a Pharmaceutical Wholesaler Permit), and (ii) a Good Drug Distribution Practice Certificate
  2. Medical device wholesalers that hold: (i) a Medical Devices Distribution Certificate (also known as a Medical Device Wholesaler License), and (ii) a Good Medical Device Distribution Practice Certificate


Notwithstanding the above, pharmaceutical companies are still required to submit an application to receive the preliminary refund of VAT overpayment.

In order to apply for a preliminary refund of a tax overpayment, a pharmaceutical company must be declared as a 'Low Risk Taxable Enterprise' by the Directorate General of Tax (DGT), which is done through an official declaration issued by the DGT. The DGT will issue the aforementioned declaration within 15 working days after the submission of the application to the relevant tax office.


For context, to qualify as a 'Low Risk Taxable Enterprise', the pharmaceutical companies set out above must meet certain qualifications, as follows:

  • They have submitted a monthly VAT return (Surat Pemberitahuan Masa) for the last 12 months.
  • They are not subject to an ongoing tax audit for preliminary evidence of a tax crime and/or a tax crime investigation.
  • They have not been subject to a tax crime penalty due to a tax crime action based on a binding court decision within the last five years period.

In our view, the preliminary refund of VAT overpayment for pharmaceutical companies is a form of protection provided by the government to protect rights of taxpayers and support the national health assurance program. Through the issuance of Regulation 117, the preliminary tax overpayment refund procedure for pharmaceutical companies can be faster. However, like any other regulations, there are terms and conditions under this regulation that the public needs to be aware of.