VAT Rate of 12% in Effect: Tax Base (DPP) Adjusted, No Change in Tax Payable
Authors
Under Law No. 7 of 2021 on the Harmonization of Tax Regulations (commonly referred to as the Harmonized Tax Regulations Law or “UU HPP”), the Indonesian government had initially announced an increase in the Value-Added Tax (“VAT”) rate from the existing 11% to 12%, which was scheduled to take effect on 1 January 2025. This adjustment was part of broader tax reforms aimed at optimizing state revenues and aligning Indonesia’s tax policies with global best practices.
However, on 31 December 2024, the Minister of Finance (“MoF”) issued MoF Regulation No. 131 of 2024 concerning VAT Treatment on the Import of Taxable Goods, Delivery of Taxable Goods and Services, and Utilization of Intangible Taxable Goods and Services from Outside the Customs Area within the Customs Area (“MoF Reg 131/2024”). This new regulation provided an alternative approach to handling VAT adjustments. Instead of increasing the VAT rate to 12% as previously planned, the government decided to maintain the existing rate by adjusting the tax base (Dasar Pengenaan Pajak – “DPP”) used to calculate the VAT payable (pajak terutang).
Imposition of 12% VAT
-
VAT on luxury taxable goods
-
VAT on non-luxury taxable goods and taxable services
For the delivery of luxury goods, including motor vehicles as stipulated in MoF Regulation No. 42/PMK.010/2022 and non-motor vehicles as stipulated in MoF Regulation No. 15/PMK.03/2023, a VAT rate 12% will apply.
However, during a transitional period from January 1 to January 31, 2025, the tax base for calculating VAT payable will be adjusted to 11/12 of the selling price or import value.
In other words, the tax payable on VAT will remain unchanged, as the tax base has been adjusted accordingly.
On 1 January 2025, PT ABC sells 1 unit of townhouse to Mr A for Rp 30 billion. During this transitional period, the VAT on the sale will be calculated as follows:
VAT = 12% x (11/12 x Rp 30 billion) = Rp 3.3 billion.
On 15 July 2025, PT ABC sells 1 unit of townhouse to Mr B for Rp 30 billion. The VAT on the sale will be calculated as follows:
VAT = 12% x Rp 30 billion = Rp 3.6 billion.
For the delivery of other taxable goods (other than luxury goods), delivery of taxable services within the customs area, and the utilization of intangible taxable goods and taxable services from outside the customs area within the customs area, a 12% VAT rate will apply, with the tax base being multiplied by 11/12 for calculation.
On 7 January 2025, PT XYZ sells 1 unit of laptop to Mr X for Rp 10 million. The VAT on the sale will be calculated as follows:
VAT = 12% x (11/12 x Rp 10 million) = Rp 1.1 million.
As a result, it can be concluded that the VAT payable will remain unchanged from the amount previously payable when the VAT rate was 11%.
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
Related Updates
Latest Updates
