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Tax Policy Package Update

Indonesia

The Indonesian Minister of Finance has issued a number of tax policies which recently came into effect. Taxand Indonesia looks at these measures in detail.

VAT-exempt homes
Homes whose value are not more than Rp 70 million (originally Rp 55 million) will now be exempt from VAT. The exemption applies to homes measuring 36 sq.m. that are fitted to minimum standards and which are suitable for a family consisting of parents and two children. This policy is intended to expand the opportunities for low and middle-income families to purchase their own homes through housing finance schemes.

Toll / Contract Manufacturing
Toll / contract manufacturing is frequently employed in the clothing industry. The company in Indonesia receives an order from overseas and receives the raw materials from overseas. When the raw materials are received by the clothing company, it must pay VAT after the clothes are produced and exported to the orderer. In such case, the input tax can now be refunded. It is important to note that every delivery of goods and / or services must be regularly reported in periodic VAT returns, with the result that input tax arising of both toll / contract manufacturing goods and services can be credited.

VAT on cooking oil to be borne by government
In order to improve the quality of cooking oil and ensure that it is safe for human consumption, and at the same time ensure the availability and affordability of cooking oil, the government has placed a tax subsidy on cooking oil in the form of deferred VAT on unpackaged cooking oil, and cooking oil sold in simple packages under the trademark "Minyak Kita." It is hoped that this policy will be effective in stabilising the price of cooking oil and improving hygiene, as was the case in previous years.

Customs & Excise Exemption Procedures Simplified
This policy is aimed at gifts of goods made for religious, charitable, social and cultural purposes which are imported into Indonesia and is intended to simplify the procedures for obtaining exemption from customs and excise duties so as to speed up the distribution process. In addition, the number of documents required will be reduced. Thus, the time required should be reduced from two months to ten days.

Change in VAT Tax Base
In order to encourage non-oil and gas exports, adjustments need to be made to the rules on the tax base for the calculation of VAT and Luxury Sales Tax, in particular to imported goods that are intended to subsequently be re-exported. The purpose is to change the tax basis for sales to the Other Indonesian Customs Area (DPIL) in respect of side products, remaining products, defective products and defective raw materials, the raw materials for which are imported. These were originally taxed based on the import price, but will now be taxed based on the sale price.

E-Tax Payment
After the success of e-Registration and e-Filing, now the Directorate General of Taxes is developing e-Payment, that is,
a system whereby tax payments can be made electronically, so as to improve the effectiveness of state revenue
management. A trial involving the new system will be held until 4 August 2011. However, the trial will not extend to payments of Land and Building Tax, or import and customs duties. If you want to participate in the trial, you may register at www.sse-reg.pajak.go.id.

Taxand's Take


It is important that multinationals are aware of these recent changes to ensure they are fully compliant at all times.

Your Taxand contact for further queries is:
Prijohandojo Kristanto
T. +62 21 835 6379
E. prijohandojo@pbtaxand.com

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Taxand's Take Author