Regulation Update

Rate Rises, Minister of Finance Releases List of 11 Transactions of Value Added Tax Object

MUC Tax Research Institute | Wednesday, 06 April 2022

The government confirmed the increase in the Value Added Tax (VAT) rate from 10% to 11% starting 1 April 2021, by issuing dozens of Minister of Finance Regulations. The new VAT rate will target certain types of transactions for the transfer of goods and/or services, ranging from fertilizers, cigarettes, and used motorcycles, to crypto assets.

This affirmation by the Minister of Finance Sri Mulyani Indrawati is a mandate of the Harmonized Tax Law (HPP law), one of the clauses of which is to gradually increase the VAT rate starting 1 April 2022 to 11% and to 12% by the end of 2024.

The following is a list of transactions for the transfer of goods and/or services whose tax imposition schemes and tax reporting procedures are adjusted according to the new VAT rate policy:

Procurement of goods and/or services through the Government Procurement Information System
Utilization of intangible goods and/or services from outside the customs territory through trade through electronic systems
Self-building activities
Transfer of certain Liquid Petroleum Gas (LPG)
Transfer of tobacco products
Transfer of certain agricultural goods
Transfer of used motor vehicles
Transfer of subsidized fertilizers to the agricultural sector
Transfer of insurance agent services, insurance brokerage services, and reinsurance brokerage services
Crypto asset trading transactions
Implementation of financial technology (Fintech)

The HPP Law also gives discretion to the government to change the VAT rate as long as it does not exceed the minimum limit of 5% and a maximum of 15%.

To change the VAT rate, the government only needs to issue a Government Regulation (PP) after it is approved by the House of Representatives (DPR), through the State Budget mechanism.

The following is a list of implementing regulations for the HPP Law related to the new VAT policy issued by the Minister of Finance:

Minister Of Finance Regulation (PMK) Number 58/PMK.03/2022 on Appointment of Other Parties as Tax Collectors and Procedures for Tax Collection, Payment, and/or Reporting Collected by Other Parties on Transactions of Goods and/or Services Procurement through the Government Procurement Information System
PMK Number 59/PMK.03/2022 on Amendment to PMK Number 231/PMK.03/2019 Regarding Procedures for Registration and Nullification of Taxpayer Identification Numbers, Confirmation and Confirmation on Revocation of VAT-Registered Persons, as well as Tax Withholding and/or Collection, Payment and Reporting for Government Institutions
PMK Number 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 Territory in the Customs Territory through Trade using Electronic Systems
PMK Number 61/PMK.03/2022 on Value Added Tax on Self-Building Activities
PMK Number 62/PMK.03/2022 on Value Added Tax on the Transfer of Certain Liquefied Petroleum Gas
PMK Number 63/PMK.03/2022 on Value Added Tax on Transfer of Tobacco Products
PMK Number 64/PMK.03/2022 on Value Added Tax on the Transfer of Certain Agricultural Products
PMK Number 65/PMK.03/2022 on Value Added Tax on the Transfer of Used Motor Vehicles
PMK Number 66/PMK.03/2022 on Value Added Tax on the Transfer of Subsidized Fertilizers for Agriculture Sector
PMK Number 67/PMK.03/2022 on Value Added Tax on the Transfer of Insurance Agency Services, Insurance Broker Services, and Reinsurance Broker Services
PMK Number 68/PMK.03/2022 on Value Added Tax and Income Tax on Crypto Asset Trading Transactions
PMK Number 69/PMK.03/2022 on Income Tax and Value Added Tax on the Implementation of Financial Technology
PMK Number 70/PMK.03/2022 on Criteria and/or Details of Food and Beverages, Art and Entertainment Services, Hospitality Services, Parking lot Provision Services, as well as Catering Services, which are Not Subject to Value Added Tax
PMK Number 71/PMK.03/2022 on Value Added Tax on the Transfer of Certain Taxable Services.