In brief

On 30 March 2022, the government issued 14 Minister of Finance regulations as implementing regulations of Law No.7/2021 on Tax Regulation Harmonization ("HPP Law"). The Director General of Tax officially announced the issuance of the 14 implementing regulations through press release No. SP-23/2022 dated 4 April 2022. The implementing regulations will provide further guidance for taxpayers to implement the provisions set out in the HPP Law, and will enhance Indonesian fiscal policy and accelerate economic recovery.

​​​​​The implementing regulations set out changes based on the HPP Law. Those changes include an increase of the VAT rate, the introduction of a new basis for imposition of VAT charges and the appointment of other parties to withhold income tax and collect VAT. A brief summary of the VAT regulations is set out below and will provide more detailed insights of certain implementing regulations in our subsequent publications.

A. The Appointment of Other Parties as a Tax Collector for Income Tax and VAT 

These are the implementing regulations of Article 32A of Law No. 6/1983 as last amended by Law No. 7/2021 on General Tax Provisions and Procedure Law ("GTP Law").

1. MoF Reg No. 58/PMK.03/2022 on Appointment of Other Parties as Tax Collectors and Procedures for Tax Collection, Deposit, and/or Reporting Collected by Other Parties on Transactions of Goods and/or Services Trade Through the Government Procurement Information System

• Other parties must collect, pay and/or report the tax on the delivery of goods and/or services carried out by partners, which includes delivery to government agencies and parties other than government agencies in the Procurement Information System.

• Taxes that must be collected by other parties include 0.5% Income Tax Article 22, VAT, and Sales Tax on Luxurious Goods.

• Other parties that are appointed as a Tax Collector include a Procurement Marketplace and Procurement Online Retail, which are directly involved in facilitating transactions between parties transacting through the Procurement Information System.

• The regulation will become effective per 1 May 2022.

2. MoF Reg No. 68/PMK.03/2022 on Value Added Tax And Income Tax on Crypto Assets Trading Transaction

• Crypto assets are considered as Intangible Taxable Goods, which on the delivery by the seller are subject to VAT.

• Delivery of taxable services include the provision of electronic facilities services that are used for the trading of crypto assets by Trade Operators Through Electronic Systems (i.e., exchanger and e-wallet), crypto asset verification services (mining) and/or crypto asset mining pool services.

• The crypto assets trading and mining services are subject to the following rates:

• The crypto assets trading:

• The Final Income Tax Article 22 is imposed on 0.1% of the crypto assets value (registered in Bappebti and delivering the e-wallet services, or 0.2% of the crypto assets value (not registered in Bappebti and delivering the e-wallet services).

• The VAT is 0.11% if the marketplace is registered in Bappebti, or 0.22% if the marketplace is not registered in Bappebti.

• Marketplace services:

• The VAT is 11% of the delivery of services through electronic systems.

• Mining services:

• The Final Income Tax Article 22 is imposed on 0.1% of the income related to the crypto assets.

• The VAT is 1.1% of the crypto asset value.

• The regulation will become effective per 1 May 2022.

3. MoF Reg No. 69/PMK.03/2022 on Income Tax and Value Added Tax on the Implementation of Financial Technology

• VAT is imposed on the delivery of financial technology operation services by an entrepreneur.

• Financial technology operation services include the provision of payment services, investment transactions settlement operation, capital raising operation, peer-to-peer lending services ("P2P"), investment management operation, provision of online insurance product services, market support services and digital finance support and other financial services activities.

• Money in the form of electronic media (i.e., bonus points and top up points), fund placement or funding services through a P2P platform, financing services and online insurance services are not subject to VAT.

• Under the P2P scheme, interest income received by a lender is subject to withholding tax Article 23/26. The P2P provider may be appointed to withhold the income tax.

• The regulation will become effective per 1 May 2022.

B. The Appointment as a VAT Collector

These are the implementing regulations of Article 16A of Law No. 8/1983 as last amended by Law No. 7/2021 on Value Added Tax ("VAT Law").

1. MoF Reg No. 59/PMK.03/2022 on Amendment to Minister of Finance Regulation Number 231/PMK.03/2019 Regarding Procedures for Registration and Nullification of Taxpayer Identification Numbers, Confirmation and Confirmation on Revocation of Taxable Entrepreneurs, as well as Tax Withholding and/or Collection, Deposit and Reporting for Government Institutions

• The regulation stipulates the exemption of withholding taxes, Income Tax Article 22, VAT and Sales Tax on Luxurious Goods by the government institution for payments with stock money mechanism made through other parties in the Government Procurement Information System.

• Income Tax Article 22, VAT and Sales Tax on Luxurious Goods also exempted for payments using government credit cards for spending of a central, regional and provincial government institution.

• The regulation will become effective per 1 May 2022.

2. MoF Reg No. 67/PMK.03/2022 on Value Added Tax on the Delivery of Insurance Agency Services, Insurance Broker Service, and Reinsurance Broker Service

• As VAT collectors, insurance and reinsurance companies must collect, pay, and report VAT on commission payments for insurance agent services and insurance and/or reinsurance brokerage services.

• The VAT is calculated at a certain amount:

• 10% of the VAT rate or 1.1% of commission or fee of an insurance agent.

• 20% of the VAT rate or 2.2% of commission or fee of an insurance agent.

• The regulation will become effective per 1 April 2022.

C. The Adjustment of VAT Rate

The VAT rate in Indonesia became 11% per 1 April 2022. These are the implementing regulations of the VAT Law that are amended to adjust the new VAT rate.

1. MoF Reg No. 60/PMK.03/2022 on Procedures to Appoint Collector, Collection and Payment, and Reporting of Value Added Tax on the Use of Taxable Intangible Goods and/or Taxable Services from Outside of the Customs Area in the Customs Area through Trade using Electronic Systems

• VAT is imposed on the use of Taxable Intangible Goods and Taxable Services from Outside of the Customs Area in the Customs Area Through Trade using Electronic Systems.

• The VAT must be collected, paid and reported by foreign sellers, foreign service providers, foreign and/or Indonesian Trade Operators Through Electronic Systems (i.e., e-commerce marketplaces) that are appointed as VAT collectors by the Minister.

• The VAT that must be collected is 11% per 1 April 2022 and 12% per 1 January 2025.

• The regulation will become effective per 1 April 2022.

2. MoF Reg No. 61/PMK.03/2022 on Value Added Tax on Self- Building Activities

• Self- building activities include the activities to increase the area of the existing buildings and activities to build a building by other parties for individuals or entities, where the VAT is not collected by other parties.

• The VAT payable:

• VAT is 20% x VAT rate x the VAT basis. The effective VAT rate is 2.2% (with the VAT rate of 11%).

• VAT that has been deposited can be credited as long as it fulfills the conditions for crediting input tax and filling out Tax Payment Slips.

• The regulation will become effective per 1 April 2022.

3. MoF Reg No. 62/PMK.03/2022 on Value Added Tax on the Delivery of Certain Liquefied Petroleum Gas

• VAT is imposed on the delivery of certain liquefied petroleum gas. For the part of the subsidized price, VAT is paid by the government and for the unsubsidized part of the price, VAT is paid by the buyer.

• On the delivery by an entity, the VAT is calculated by multiplying the VAT rate by another value as the basis of tax imposition as set out in this regulation.

• On the delivery by an agent and/or base-point, the VAT must be collected and paid in a certain amount as set out in this regulation. • The VAT rate is 11% per 1 April 2022 and 12% per 1 January 2025.

• The regulation will become effective per 1 April 2022.

4. MoF Reg No. 63/PMK.03/2022 on Value Added Tax on the Delivery of Tobacco Products

• Tobacco products include cigarettes, cigars, leaf cigarettes, sliced tobacco, electric cigarettes, and other tobacco processing products, regardless of whether or not substitute materials or auxiliary materials that are used in the manufacturing process, in accordance with the provisions of laws in the field of excise.

• The VAT is calculated by multiplying the VAT rate by another value as the basis of tax imposition as set out in this regulation.

• VAT is imposed on the delivery of domestically produced tobacco products by producers and/or tobacco products made overseas by an importer.

• The VAT rate is 11% per 1 April 2022 and 12% per 1 January 2025.

• The regulation will become effective per 1 April 2022.

5. MoF Reg No. 64/PMK.03/2022 on Value Added Tax on the Delivery of Certain Agricultural Products Goods

• The delivery of certain agricultural products set out in the attachment of this regulation is subject to VAT of 1.1% of the sales price starting from 1 April 2022 and 1.2% of the sales price starting from 1 January 2025.

• The regulation will become effective per 1 April 2022.

6. MoF Reg No. 65/PMK.03/2022 on Value Added Tax on the Delivery of Used Motorized Vehicles

• Used motorized vehicles do not include the delivery of taxable goods in the form of assets, which were originally not for trading purposes as regulated in Article 16D of the VAT Law.

• For the delivery of used motorized vehicles, the VAT is 1.1% of the sales price starting from 1 April 2022 and 1.2% of the sales price starting from 1 January 2025.

• The input tax related to the delivery of used motorized vehicles cannot be credited.

• The regulation will become effective per 1 April 2022.

7. MoF Reg No. 66/PMK.03/2022 on Value Added Tax on the Delivery of Subsidized Fertilizers for the Agriculture Sector

• VAT is imposed on the delivery of subsidized fertilizers for the agriculture sector. For the part of the subsidized part of the price, VAT is paid by the Government and for the unsubsidized part of the price, VAT is paid by the buyer.

• For the part that is not subsidized and for the delivery by a producer, the VAT is calculated by multiplying the VAT rate by another value as the basis of tax imposition as set out in this regulation.

• The VAT rate is 11% per 1 April 2022 and 12% per 1 January 2025.

• The regulation will become effective per 1 April 2022.

8. MoF Reg No. 71/PMK.03/2022 on Value Added Tax on the Delivery of Certain Tax Imposition Services

• Taxable Entrepreneurs that conduct delivery of certain taxable services must collect, pay and report the VAT payable at a certain amount as set out in this regulation.

• Certain taxable services that are subject to VAT include postal package delivery services, travel agency services and/or travel agent services, freight-forwarding services, marketing services using voucher media, payment transaction services related to distribution vouchers, service for organizing customer loyalty and reward programs, and travel services to other places for religious purposes.

• The VAT rate is 11% per 1 April 2022 and 12% per 1 January 2025.

• The input tax cannot be credited.

• The regulation will become effective per 1 April 2022. 

D. Synchronize with the Regional Tax and Regional Retribution

1. MoF Reg No. 70/PMK.03/2022 on Criteria and/or Details of Foods And Beverages, Art and Entertainment Services, Hospitality Services, Parking Lot Provision Services, as well as Catering Services, which are not imposed with Value Added Tax

• Certain foods and beverages, arts and entertainment services, hospitality services, parking lot provision services and catering services that are objects of Regional Tax and Retribution are not subject to VAT (e.g., foods and beverages served in hotels, and restaurants, and by catering entrepreneurs).

• Certain foods and beverages provided by an entrepreneur, arts and entertainment services, hospitality services, parking lot provision services and catering services are subject to VAT. (e.g., foods and beverages provided by supermarket entrepreneurs, the delivery of digital services through internet channels and electronic networks and travel services by hotel service management).

Actions to Consider

A detailed review of the regulation is advised to check if you are affected with the regulation above.