VAT on Rent of Retailer Store is Borne by the Government

The government will bear the Value Added Tax (VAT) on store rent payment in the form of a room or building, from retail business actors or retail traders who sell their goods to final consumers for three months, starting from the rent period in August to October 2021 which is billed in August until  November 2021.

This is a relaxation given to businesses affected by the Corona Virus Disease 2019 (Covid-19) pandemic, especially after the government issued an Emergency Public Activity Restriction (PPKM) policy as well as level 4 PPKM.

In detail, the establishments that are the object of the provision of this facility include stand-alone shops or outlets or those located in shopping centers, shopping complexes, apartment facilities, hotels, hospitals, educational facilities, public transportation facilities, offices, or traditional markets.

This incentive is stipulated in Regulation of the Minister of Finance (PMK) Number 102/PMK.010/2021 which is released and effective from the date of enactment, on 30 July 2021.

Read: Let's Keep an Eye on The VAT Policy!

Including Service Charge

The amount of VAT that will be borne by the government is calculated by multiplying the applicable VAT rate of 10% with the tax base, in the form of reimbursement which is a service charge that is billed with rental services or charged separately.

However, to obtain this facility, every delivery of rental services from a service provider or owner of business premises to retailers must still be accompanied by a tax invoice containing the transaction code "07".

In the tax invoice is also added the description "VAT is Borne by the Government, Execution of PMK Number 102 / PMK.010 / 2021(PPN Ditanggung Pemerintah Eksekusi PMK Nomor 102/PMK.010/2021)" and added the phrase "rent a room or building (sewa ruangan atau bangunan)" and a description of the location and month of rent in the service name column.

Meanwhile, if the tax invoice is made through the e-invoice application, the service provider must choose the stamp "VAT borne by the government for the execution of PMK Number 102/PMK.010/21" on the application.

However, if the stamp option is not yet available in the application, the service provider must update the stamp by accessing the stamp synchronization menu.

Making a Realization Report

In addition to making invoices, another obligation that is a condition for using the facility is the preparation of a report on the realization of government-borne VAT for each fiscal period, along with the creation of a tax invoice.

The realization report must be done not more than the end of the following month after the tax period. This means that for the use of the VAT facility for rent payments in August 2021, the report must be submitted by the end of September 2021.

If the tax invoice and realization report is not created, then the taxpayer is not entitled to use the government-borne VAT incentive. Thus, the VAT that should be payable must still be collected by the service provider.

Furthermore, the government will conduct assessments to ensure that the facilities are used properly. If based on the results of the assessment it is known that the services provided are not space or building rental to retailers or the rental period is not appropriate, then the tax authority will still collect VAT that should be payable for the transaction.