In a Circular issued in years ago, DGT has regulated some types of services included in the manpower group which is not subject to VAT. Through the MoF’s Regulation Number: 83/PMK.03/2012 issued last June 6, 2012, the Minister of Finance re-affirmed the provision previously stipulated by DGT by adding several additional information.
Referring to the Minister of Finance, the manpower service group which is not subject to VAT includes the following:
1. Manpower service;
2. Manpower supply service, as long as meeting certain criteria; and
3. Training organizer service for workers.
Manpower Service
Manpower service is a service rendered by the worker to the manpower service user with the following criteria:
1. The worker obtains remuneration in the form of salary, wage, honorarium, allowance, and such; and
2. The worker is directly responsible to the service user upon the manpower service rendered.
Manpower Supply Service
Manpower supply service is a service for supplying manpower by the manpower supply entrepreneur to the manpower service user.The Manpower supply service may include the following activities:
1. Recruitment;
2. Education;
3. Training;
4. Internship; and/or
5. Worker placement,
in which its activity is conducted in one unit with manpower supply service rendering.
The service is not subject to VAT as long as meeting certain criteria, as follows:
1. The manpower supplier only renders the manpower supply service which does not relate with other Taxable Service provision such as technical service, management service, consultation service, company management service, loading and discharging service, and/or other services;
2. The manpower supplier does not make payment of salary, wage, honorarium, allowance, and/or such to the supplied worker;
3. The manpower supplier is not responsible to the work performance of the worker supplied after being transferred to the manpower service user; and
4. The manpower supplied is included into the employee structure of the user.
In case the service supplier can seperate between the invoice on the fee received by the supplier and the fee received by the worker, the Tax Imposition Base on the service transfer does not include the fee received by the worker. In other words, the Tax Base used to calculate the VAT payable is only in the form of invoice requested or should be requested by the supplier to the user.
Training Organizer Service for Worker
This service constitutes worker training organizer held by the work training institution which has obtained licence or has been registered in the institution responsible in the manpower sector. In addition, this service also relates to the internship activities conducted as an integrated part of the training organizer service for workers.
