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New Value Added Tax (VAT)

The COVID-19 pandemic has left lasting damage, not only to public health, but to the economy as well. A lot of effort will be required to recover both aspects, both by the government and by individuals. One of the steps that the government has taken to accelerate economic growth during this pandemic is issuing a new tax regulation in the form of Law No. 7 of 2021 regarding Tax Regulation Harmonization (Law No. 7 of 2021) on 29th October 2021 which revised many tax provisions, including the Value Added Tax (VAT) which was previously regulated in No. 42 of 2008 regarding Third Amendment to Law No. 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods (Law No. 42 of 2008).

The previous VAT provision as stipulated in Law No. 42 of 2008, was 10%, which has been used since its issuance in 2008. However, Law No. 7 of 2021 revised the provision to 11%, which will come into effect starting in 1st April 2022 and 12% later on 1st January 2025. According to Article 4, the Value Added Tax objectives are:

  1. delivery of Taxable Goods within the Customs Region carried out by business actors;
  2. import of Taxable Goods;
  3. delivery of Taxable Services within the Customs Region carried out by business actors;
  4. utilization of Intangible Taxable Goods from outside the Customs Area inside the Customs Area;
  5. utilization of Taxable Services from outside the Customs Region within the Customs Area;
  6. export of Tangible Taxable Goods by Taxable employers;
  7. export of Intangible Taxable Goods by Taxable employers; and
  8. Export of Taxable Services by Taxable Business actors.

The VAT is calculated by multiplying the tariff by the Tax Imposition Basis including Selling Price, Replacement, Import Value, Value Export, or other value.

During these times, there are many more adjustments in many fields that the government will make. We are always up to date and ready to help you with whatever issue you have. If you need help or consultation, feel free to contact us via info@schinderlawfirm.com.

Author: Suryani Lin