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Value Added Tax (VAT & Sales Tax on Luxurious Goods (STLG)

Written by Abel Reginaldo on 11/07/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

To optimize tax revenue, regulate consumption, and maintain economic stability, Indonesia has implemented a Value Added Tax/Pajak Pertambahan Nilai (VAT/PPN) at every stage of the supply chain. Compliance with regulations is crucial to avoid penalties. This article explores Value Added Tax and the Sales Tax on Luxurious Goods/Pajak Penjualan Atas Barang Mewah (STLG/PPnBM), covering subjects, objects, tax rates, and non-compliance consequences.

Definition

VAT (Value Added Tax)

As per Article 1 of Law Number 7 Year 2021 , the amount of tax depends on the sale and purchase of goods or services by individual or corporate taxpayers recognized as Taxable Entrepreneurs (Pengusaha Kena Pajak/PKP). It taxes the value added to goods and services throughout their distribution.

Sales Tax on Luxurious Goods

Sales Tax on Luxurious Goods is an additional tax on luxury goods beyond the standard Value Added Tax, targeting high-value items such as cars and apartment to regulate their market consumption.

Taxable Entrepreneurs

As per outlined in Article 1 Paragraph 15 of Value Added Tax Regulation, Taxable Entrepreneurs who deliver or transfer the Taxable Goods (Barang Kena Pajak/BKP) and/or Taxable Services (Jasa Kena Pajak/JKP) are governed by the provisions of the Value Added Tax Regulation. Only those classified as Taxable Entrepreneurs are permitted to apply VAT on transactions.

The Importance and Benefits of VAT and STLG

The importance and benefits of Value Added Tax and Sales Tax on Luxurious Goods for taxable entrepreneurs include:

Status and Reputation: By becoming a Taxable Person for VAT Purposes, an individual or corporate entrepreneur is considered to have a good system, is legally compliant, and is orderly in paying taxes.
Perceived Business Size: By becoming a PKP, both individual and corporate entrepreneurs are considered large, and PKP status will influence cooperation with other large companies.
Government Transactions: It can conduct transactions with the Government treasury and participate in auctions held by the Government.
Production and Investment Advantage: The advantage of becoming a Taxable Person for VAT Purposes lies in better production and investment patterns, as the burden of production and investment of taxable goods and services can be charged to the final consumer.

Timing for Compliance

Entrepreneurs are required to register their businesses to gain official recognition as Taxable Entrepreneurs, making them responsible for collecting, remitting, and reporting VAT and STLG. However, those classified as Small Enterprises, with annual revenue below Rp4.800.000.000,00, are exempt from these requirements, as specified in Minister of Finance Regulations 197/PMK.03/2013.

The Process of Complying With VAT and STLG

The process of complying with VAT and STLG involves several key steps:

Registration: Register as Taxable Entrepreneurs.
Tax Invoice Issuance: Issue tax invoices for every sale or service.
Tax Collection: Collect VAT and STLG at applicable rates.
Record Keeping: Maintain comprehensive transaction records.
Tax Reporting and Remittance: Submit reports and remit taxes within deadlines.
Compliance Monitoring: Regularly review and update practices.

How We Can Help

Putranto Alliance is your trusted partner in navigating the VAT and STLG compliance. Our team of experts offers comprehensive support, from document preparation to liaising with government agencies, ensuring a hassle-free transition to life in Indonesia.

Tax Registration Assistance: Guidance in registering as Taxable Entrepreneur.
Tax Compliance Consulting: Expert advice on VAT and STLG regulations.
Tax Return Preparation and Filing: Assistance in preparing and filing tax returns.
Tax Audit and Objection Handling: Support in managing audits and objections.
Dispute Resolution: Assisting businesses in resolving disputes with the tax authorities regarding VAT assessments and penalties.

By partnering with Putranto Alliance, businesses can navigate the intricacies of Value Added Tax and Sales Tax on Luxurious Goods with confidence, ensuring compliance, and focusing on their core operations without the administrative burden of tax management.

FAQs

What are the specific VAT rates applicable in Indonesia?

The standard rate in Indonesia is 11%. However, the rate will become 12% in 2025 as per Article 7 Clause 1 of Law Number 7 Year 2021.

How does VAT differ from STLG?

Value Added Tax is collected at each supply chain stage, while Sales Tax on Luxurious Goods is levied only at the final sale of luxury goods.

What impact does VAT have on luxury goods pricing?

The tax increases the final retail price of luxury goods due to its cumulative effect.

How does STLG affect luxury goods purchases?

The sales tax increases the cost of luxury goods at the point of sale, influencing consumer decisions.

How can a business determine if it qualifies as a Taxable Entrepreneur?

A business is obliged to register as a Taxable Entrepreneur if its annual revenue is more than Rp4.800.000.000,00. However, they can still register as a Taxable Entrepreneur even if their annual revenue is less than Rp4.800.000.000,00.

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