10 Important Points in New VAT Regulations

The government issued a new regulation regarding Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLG), in the form of Government Regulation (PP) Number 44 of 2022 which simultaneously revoked PP Number 1 of 2012. There are 10 important points in the VAT and STLG provisions in the implementing regulations for the Law on the Harmonization of Tax Regulations (UU HPP).

In substance, the regulation that took effect on 2 December 2022 contains several new provisions, as well as some improvements from the old rules. Such as the provisions for appointing other parties as VAT collectors, VAT provision for personal use, transfer of collateral, and others.

However, there are still a number of substances that are maintained or remain the same as the previous provisions. Such as the inauguration of a VAT-registered person, determination of the basis for the imposition of VAT or STLG, provision for filling out tax invoices, and others.

The following are some of the newly regulated provisions in the latest regulation:

First, the appointment of another party to collect, pay and report VAT and/or STLG. The other parties referred to include merchants, service providers, and/or merchant organizers through the electronic system (PMSE).

Provisions for VAT on Personal Use

Second, the imposition of VAT or STLG on taxable goods that are for personal use, now there is no difference between productive or consumptive goods.

It means that whether personal use for production purposes or non-production is still subject to VAT or STLG. This is as stated in Article 6 paragraph (3):

"Personal use of Taxable Goods and/or Taxable Services as referred to in paragraph (1) and paragraph (2) is the use or utilization for the benefit of the Entrepreneur himself, management, or employees, both self-produced and non-self-produced."

In fact, in the previous regulation, personal use of taxable goods for productive activities was not subject to tax or received VAT exemption facility.

Meanwhile, still in the same Article, the government also emphasizes the VAT provision on free gifts considered as the transfer of goods and/or services that are taxable and subject to VAT.

The Transfer of Collateral is VAT Payable

Third, the transfer of collateral by creditors to buyers is now determined as taxable goods and must be subject to VAT or STLG. This provision is regulated in Article 10, which specifies in detail several types of collateral whose transfer is subject to VAT, namely:

• Mortgage rights on land and objects related to land
• fiduciary guarantee
• mortgage
• Fiduciary or other similar charges

VAT-Free Sukuk Transactions

Fourth, in Article 12 of the new regulation, the government now stipulates that the transfer of goods through a sharia financing transaction scheme is not subject to VAT, as long as the taxable goods are returned to the party that transferred them.

As for what is meant by the transfer of taxable goods in the sharia transaction scheme those related to the issuance of Sukuk and trading in the sharia commodity market.

VAT on Certain Amounts

Fifth, through the latest regulation the government also regulates the collection and payment of VAT or STLG using a certain amount, for business actors who have a total revenue in one year below a certain value, carry out certain business activities and/or deliver certain taxable goods or services.

The provisions stipulated in Article 15 state that the specific amount in question is the result of the multiplication of the tariff with a certain formula which is then multiplied by the tax base in the form of a selling price, replacement, or a certain value.

Another new provision is related to the use of certain documents equated with tax invoices regulated in Articles 28, 29 and 30

Improvement

Apart from adding new substances, Government Regulation (PP) 44 of 2022 also improves the number of substances that were previously regulated in PP 1 of 2012. The following are some of the substances that have undergone improvements.

First, buyers or service recipients who are jointly and severally responsible can now carry out their obligations by making tax payment letter (SSP) or by self-assessment, in addition to issuing tax assessment letter (SKP). Meanwhile, in the previous regulation, it can only be billed with the issuance of a tax assessment letter.

Provision for VAT on Auction Items

Second, the government also emphasized VAT provision on auction activities. In Article 9 of the newly mentioned regulation, the transfer of taxable goods through auction organizers is still subject to VAT.

However, the owner of the items is considered unclear, so it is necessary to make more technical rules.

Meanwhile, under the old regulation, goods submitted through auctioneers still had to be subject to VAT and a tax invoice had to be issued by the owner of the goods. If not, then the tax invoice is made by the recipient of the goods through the tax payment letter.

VAT Calculation Formula

Third, the government also adjusts the formula for calculating VAT or STLG payable which is already part of the price or payment value.

If in the previous rules the determination of VAT or STLG payable uses a formula;

100/1110 X price or payment

Thus, in the new provisions, specifically in Article 17 paragraph (1), the formula used is:

T/ (100% + T) X price or payment, where T is the symbol of the applicable VAT rate.

VAT Due to Audit

Fourth, in the new regulation, the government emphasizes that the basis for imposing VAT arising from an audit refers to the results of the audit.

The Use of the Tax Exchange

Fifth, the government has also improved the provision regarding the use of the tax exchange rate used to calculate VAT or STLG payable on transactions in currencies other than the rupiah.

As was stipulated in the old provision, the calculation of VAT or STLG payable must use the rupiah currency. If using another currency, it must be converted into rupiah using the tax exchange rate.

In the new provisions, the government emphasized it. That the tax rate used should refer to the time when a tax invoice or a specific document equated with a tax invoice made.

Providing Legal Certainty

In the explanation, the government admitted that this provision change was carried out to provide legal certainty, simplify administration, provide convenience and fairness in the field of VAT and STLG, to taxpayers. (ASP/KEN/SYF)

Peraturan Pemerintah (PP) Nomor 44 Tahun 2022