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Indonesia introduces new electronic VAT invoicing system
Indonesia has introduced a new electronic VAT invoicing system, which is being implemented in 3 stages. For the first phase, the Directorate General of Taxes (DGT) has identified 45 companies which are required to issue electronic VAT invoices. Taxand Indonesia discusses how the new update will affect tax reporting for multinationals.
The Indonesian Tax Office has introduced the use of electronic VAT invoices (e-VAT invoice) under DGT Regulation No. 16/PJ/2014 dated 20 June 2014.
The regulation provides the following key points:
- The e-VAT invoice must be issued through the electronic application system determined or provided by the DGTThe e-VAT invoice must use an electronic signature
- The e-VAT invoice must use the Indonesia rupiah (IDR) as currency. If the transaction is denominated in a foreign currency, it has to be converted into IDR
- The hard copy version of the VAT invoice can be accepted only in a force majeure situation
- The use of the e-VAT invoice must be reported to and previously approved by the DGT
Moreover, DGT Decision Letter No. 136/PJ/2014 provides that the use of e-VAT invoice will be implemented in 3 stages:
- Starting 1 July 2014 – it will be mandatory for the selected 45 corporate taxpayers to issue the e-VAT invoice
- Starting 1 July 2015 – it will be mandatory for all corporate taxpayers registered in the 17 regional tax offices in the islands of Java and Bali
- Starting 1 July 2016 – it will be mandatory for all corporate taxpayers to implement the e-VAT invoice
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The first stage of the new electronic VAT invoicing system only applies to 45 companies - mostly foreign investment companies, state-owned enterprises and publicly-listed companies.
However, all multinational companies should prepare by:
- Investigating the features in their accounting software in order to ascertain if upgrades are needed to be compatible with the e-VAT invoice application system
- Taking note that the selling process will be longer since the DGT has to approve the e-VAT invoices issued, therefore corporations need to factor this in when producing business plans and schedules
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