“Final” VAT regime

13 Dec 2022

VAT

The implementation of the final VAT regime is made with reference to Article 9A of the HHP Law (Law No. 7 Year 2021 regarding Harmonization of Tax Regulations (Harmonisasi Peraturan Perpajakan/HHP). The final VAT regime is not a new concept, as in the past it was regulated under the “Other Values” VAT base regime (except for (re)- insurance agents/brokerages) – whereby the VAT base is determined at a certain rate of the gross amount of the VAT-able sales of goods/services (i.e., the deemed VAT base). The Input VAT related to the acquisition of goods or services under the “Final” VAT regime is not creditable.

Application of the final VAT regime for certain sectors and the effective tax rate.

VAT object	Effective VAT rate*
1. Self-construction activity	2.2%
2. Sales of certain agricultural products	1.1%
3. Sales of used motor vehicles	1.1%
4. Sales of: Insurance agency services (Re)-insurance brokerage services	1.1% 2.2%
5. Sales of certain VAT-able services Package delivery services Travel agency (including travel package) Religious travel services (including travel services to non-religious places): Religious travel portion – if the religious travel portion can be identified Both religious and non-religious travel – if the religious travel portion cannot be identified Freight forwarding services Provision of certain services involving the use of vouchers, which are not based on commissions and with no margin: Marketing services involving the use of vouchers Payment services relating to voucher distribution Customer loyalty/reward programs	1.1% 1.1% 1.1% 0.55% 1.1% 1.1% 1.1% 1.1% 1.1%
Note: *Calculated based on the current 11% VAT rate (this will be adjusted after the VAT rate increase to 12% as per January 1, 2025).