CONFUSED ABOUT HOW TO CALCULATE VALUE ADD TAX?

Value-Added Tax (VAT) was first introduced in Indonesia in 1984 through Law Number 8 of 1983, replacing the Sales Tax. Since then, VAT has become one of the country’s primary revenue sources. Regulations regarding VAT have been continuously updated, including rate adjustments and an expansion of taxable objects to align with economic dynamics.

Based on Article 7 of Law Number 42 of 2009 concerning the Third Amendment to Law Number 8 of 1983 on VAT and Luxury Goods Sales Tax (PPnBM), the standard VAT rate in Indonesia is 10%.

Through Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP), the government has gradually increased the VAT rate. The latest VAT rate of 11% took effect in April 2022, with a planned increase to 12% by 2025.

According to the definition of VAT, every good and/or service subject to Value-Added Tax will be taxed at the latest applicable VAT rate.

The objects subject to VAT include tangible movable goods, tangible immovable goods, and VAT objects based on their transactions as outlined in Article 4 of the VAT Law, which includes:

• Delivery of Taxable Goods (BKP) within the customs area by entrepreneurs.

• Importation of BKP.

• Delivery of Taxable Services (JKP) within the customs area by entrepreneurs.

• Utilization of intangible BKP from outside the customs area within the customs area.

• Utilization of JKP from outside the customs area within the customs area.

• Export of BKP by VAT-Registered Persons (PKP).

• Export of intangible BKP by PKP.

• Export of JKP by PKP.

After understanding the definition, rates, and objects subject to VAT, how do you calculate the 11% VAT?

The calculation of VAT must be based on the Tax Base (DPP).DPP is the amount of the selling price, compensation, import value, export value, or other value used as the basis for calculating the payable tax.

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