More Scope of Services in Export are Exempted from Value-Added Tax

Companies, investors, and individuals need to comply with various taxes in Indonesia. When it comes to Indonesia tax, your tax obligations may include individual income tax, corporate income tax, value-added tax (VAT), withholding taxes, international tax agreements, luxury-goods sales tax, tax concessions, customs & excise, and land & building tax.

This article aims to provide business update with regard to VAT of exports in Indonesia. The Minister of Finance has enforced a new regulation 32 /2019, since March 29. 2019, on Limitations on Activities and Types of Taxable Services for Which Exports Are Subject to Value-Added Tax, in order to expand the scope of taxable services of exports subject to Value-Added Tax (Pajak Pertambahan Nilai – PPN)

Regulation 32/2019 addresses the implementation of PPN incentives for export services and these related services are included in the following parts:

• Incentives Criteria
• Provisions of Tax

Indonesia Tax: Incentives Criteria

In accordance with law in Indonesia, taxable export services are facilities, goods, accommodation or rights that are taxed within the customs areas and then have the right to be distributed and utilised outside the customs.

The Ministry of Finance in Indonesia will usually grant 0% of PPN rate to exports that fulfill the following criteria:

1.Exports carried out must meet the conditions set out in agreements or contracts between the exporters and clients that address the following requirements:

• Taxable services types
• Activities details in the customs areas and outside the customs areas by clients
• Taxable services final value

2.Valid payment receipts must be available to prove that the payments are made between taxable business and clients.

The current Regulation 32/2019 has also classified exports into other different categories as shown below:

1.Export activities related to movable objects, including manufacturing services, freight forwarding services and repair and maintenance services. The requirements for manufacturing services are:

• Clients must prepare the specifications and raw or intermediate materials
• In order to create taxable goods, raw or intermediate materials must be processed
• The taxable goods are in the ownership of the clients
• Manufacturing service business must export the taxable goods

2.Export activities related to immovable objects outside the custom areas, including construction consultation services. The category covers the following activities relating to building constructions and building plans:

• Assessments
• Planning
• Design

3.Other export activities with their results used outside the customs areas through delivery services or access, including technology and information services, research and development services, international transportation rental services, consultation services, trading services, and communications services.

In technology and information services, it encompasses the following:

• IT security
• Computer systems analysis
• Cloud computing
• Contact centers
• Content creation

For international transportation rental services, it includes:

• Rental of aircraft or vessels used for international flights or voyages

As for consultation services, it consists of this type of service in the following fields:

• Legal
• Business and management
• Human resources
• Interior design and architecture
• Engineering
• Accounting
• Marketing
• Financial statements auditing
• Taxation

In trading services, it includes services for sourcing sellers in customs areas for the purposes of exports.

Lastly in communication services, it covers the following:

• Interconnected calls or international short messages
• Satellite transmitters and transponders
• Satellite control services
• Global internet connection services

Indonesia Tax: Provisions of Tax

Tax provisions covered in Regulation 32/2019 include the following:

• Whenever exports take place, the PPN is payable
• Tax invoices must be created by the taxable businesses for the exports
• Reporting exports and all manufacturing services of exports through periodic PPN returns are mandatory

How Cekindo Can Help

If you require further information on value-added tax exemption and other tax obligations when doing business in Indonesia, feel free to get in touch with us.

To make running your business easier, we offer business outsourcing services that include accounting and tax outsourcing.

Fill in the form below or visit our offices in Jakarta, Bali and Semarang.