Value-added tax (VAT) in Indonesia is imposed on the provision of services or the transfer of taxable goods. VAT rates are set out below: 

  • 10 percent imposed on most manufacturers, retailers, wholesalers, and importers;
  • Export of tangible and intangible goods are subject to zero percent VAT; and
  • Export of services is subject to zero percent VAT.

The government’s negative investment list sets out all the goods and services that are non- taxable. These include among others – mining or drilling products, basic food commodities, medical health services, financial services, and educational services.

The new Harmonized Tax Law calls for the VAT rate for almost all goods and services to increase from the current 10 percent to 11 percent in April 2022 and to 12 percent by 2025. There was an earlier plan to waive the VAT exemption for basic goods and services, such as healthcare, education, food, and financial services, but this was dropped amid concerns it could hurt consumption and fan inflation.

Around 25 percent of Indonesia’s tax revenue or 298.84 trillion rupiah (US$20.9 billion) last year came from domestic VAT.

Export services in Indonesia: Eligible for zero-rated VAT

On March 29, 2019, Indonesia’s Ministry of Finance (MOF) issued regulation PMK-32 that expands the list of export services eligible for zero-rated VAT. PMK-32, which amends the previous regulation, PMK-70, 2011, aims to encourage greater development of the country’s services sector and improve the competitiveness of domestic providers in the global market.

However, businesses that are eligible need to conduct some administrative work to obtain zero-rated VAT for their exported services.

Businesses that require guidance should seek to consult their advisors to understand whether their product is eligible and what they need to do to obtain the benefit. Meanwhile, service sector businesses that haven’t invested in the country should consider whether their products are eligible.

Requirements for zero-rated VAT

Under PMK-32, export services are defined as services (production of goods, facilities, or rights) produced within Indonesian territory by a taxable business or entrepreneur for the benefit of recipients outside of Indonesia.

The following types of exported services subject to zero-rated VAT: 

  • Toll manufacturing;
  • Repair and maintenance;
  • Freight forwarding services for export-orientated goods;
  • Construction consulting services (which includes the development of feasibility studies, assessments, and designing of a building or master plan that is located outside of Indonesia);
  • Information and technology services;
  • Research and development services;
  • Charter of aircraft or ships for international flights or shipping services;
  • Business consultation and management;
  • Legal consultation;
  • Architecture and interior design consulting;
  • HR consulting;
  • Marketing;
  • Engineering;
  • Accounting or bookkeeping;
  • Taxation;
  • Financial audits;
  • Trading services to find Indonesian suppliers for export purposes; and
  • Interconnection, satellite providers, and/or communication and data

Export services eligible for zero-rated VAT must comply with two formal requirements. There must be a written agreement between the Indonesian taxable business and the foreign recipient that must include the type of service, the value of the exported services, and a description of the service provided by the Indonesian taxable business that will be utilized by the foreign recipient, and show supporting documents for payments from the recipient of the exported service to the Indonesian service provider.

Failure to meet the above requirements will mean the service is deemed to have occurred within the territory of Indonesia and will be subject to 10 percent VAT.

PMK-32 underscores the potential for greater service sector reform.

[tips title="Did You Know"]Previous Indonesian governments have been reluctant to liberalize the country’s services sector despite its increasingly influential role in the economy; it accounted for 45 percent of the GDP in 2018. Furthermore, the sector has become the largest source of job creation, constituting 45 percent of total employment in the country in 2018.[/tips]

As such, the recent introduction of PMK-32 demonstrates the government’s commitment to realizing the potential of this sector. If the government continues to expand on reforms like PMK-32, it may inspire greater foreign investment into services, which would increase the competitiveness of the sector.

This could lead to increasing demand for skilled local talent, leading to more training opportunities for the working population from the informal sector – more than 50 percent of Indonesia’s workforce of 120 million is in the informal sector.

Additionally, providing greater market access to the service sector would allow the economy to take advantage of high-quality services available in the region, in addition to providing domestic producers with opportunities for technology and knowledge transfer, boosting efficiency and production.

Another impact of liberalizing Indonesia’s services sector would be its potential to reduce the current account deficit in the face of dwindling commodity prices and stagnant growth in the country’s manufacturing sector. The country currently does not include many service components in its exports, and a major source of its current account deficit is from the import of services, particularly in transportation and financial services.

The introduction of PMK-32 is one step in removing the obstacles for the advancement of Indonesia’s service sector. This will in-turn, move the sector towards the new perspective of global value chain (GVC) development, in which the service sector functions as ‘enablers’ to other sectors and economic activities.

VAT during pre-production period

Before the Omnibus Law, if a VAT-able entity had not moved beyond the pre-production stage (not exported or delivered any VAT-able goods or services) during a certain period of time, then the entity is deemed to have failed to produce any ‘input VAT’ that has already been credited and thus can no longer be claimed.

Under regulation PMK-18/2021, the regulation emphasizes this point and that a VAT-able entity is considered to not have made a delivery if they have not exported or delivered any VAT-able services or goods. Any deliveries made for the entity’s own use, or as gift for customers, or deliveries from a head office or branch office, are not considered as deliveries when assessing if an entity has moved beyond the pre-production stage.

The pre-production stage is generally three years, which is extended for manufacturing sectors and businesses sectors under the National Strategic Projects to five or six years, respectively.

VAT credit

The Omnibus Law provides several provisions regarding VAT credit, namely for input VAT. The provisions set out that input VAT cannot be credited and must be paid back to the state treasury by the VAT-able entity, in the event that the entity has received a refund of the tax overpayment and/or has credited the input VAT as output VAT payable in a tax period.

Also, if the VAT-able entity is compensated for excess tax payments, the VAT-able entity cannot be compensated in the next tax period.

Crediting input VAT prior to becoming a VAT-able entity

If the Directorate General of Tax deems an entity to be VAT-able, then the input VAT prior to this can now be creditable 80 percent of the output VAT.

E-Commerce Tax in Indonesia

As of July 2020, non-resident suppliers of digital services within Indonesia can now be appointed as VAT collectors and as such, are now required to collect 10 percent VAT and pay to the Indonesian government.

The following digital intangible goods will now be subject to VAT:

  • The use or the right to use copyrights material in the field of art, science, and literature, such as e-books, magazines, software;
  • The right to use recorded images or sounds which are distributed via fiber optics, satellite, or cable, among others;
  • Image recordings or sound recordings used in television broadcasts, radio broadcasts, which are distributed via fiber optics, satellite, or cable, among others; and
  • Motion-picture films or videotapes used as television broadcasts.

The government recognizes the following e-commerce entities based on their activities:

  • Merchants (sellers): Businesses or individuals that conduct electronic offerings through electronic systems either managed or owned by themselves or through an e-commerce organizer;
  • E-commerce organizers (PPMSE): Businesses or individuals that provide electronic systems to facilitate e-commerce transactions. These include business models, such as online streaming platforms, online marketplaces, online classified advertisements, and price comparison platforms, among others; and
  • Intermediary Service Organizers (PSP): These are businesses or individuals that provide search system facilities (for example, Google, Bing) or those that provide information storage services (hosting and caching).

The aforementioned entities can be either domestic or foreign businesses and the legal requirements for each type will also differ.

Domestic merchants

Domestic merchants must obtain a business license from the government’s Online Single Submission (OSS) Agency. Under the country’s Standard Classification of Business Fields, businesses carrying out trading via the internet need to comply with KBLI classification 4791.  

Domestic e-commerce organizers

Businesses who operate their own e-commerce facilities are classified as PPMSEs and must obtain a special license named, Surat Izin Usaha Perdagangan melalui Sistem Elektronik (business license for trading through an electronic system (SIUPMSE).

The SIUPMSE can be applied through the OSS system and businesses will need to adhere to certain criteria to be eligible. These are:

  • Obtaining an Electronic System Provider certificate within 14 days after the SIUPMSE is issued;
  • Must provide a website and/or application name to the government;
  • Must establish a consumer complaints section on their website/application, which includes e-mail address and contact number in addition to the details of the Directorate-General of Consumer Protection and Trade Compliance;
  • The PPMSE must provide facilities that inform or link customers to the OSS Agency’s website; and
  • The business must submit its transaction data (subscribers, payments, complaints, contracts, shipments etc.) to Statistics Indonesia (BPS), the government agency responsible for conducting statistical surveys.

Foreign merchants

Foreign merchants must provide a valid business license issued in the country where they are established to the domestic PPSME company which provides their electronic communication facilities. The domestic PPSME will then need to report all the transactional activities (subscribers, payments, complaints, contracts, shipments etc.) of the foreign merchant to the BPS.

Foreign e-commerce organizers

Foreign PPSMEs that have been appointed as a ‘VAT collector’ by the Ministry of Finance are obligated to charge the 10 percent VAT rate on the sales of digital products to Indonesian consumers.

They must first have local transaction values of the following:

  • The PPSME has completed transactions with Indonesian consumers that exceeds 600 million rupiah in a year or 50 million rupiah (US$3,500) per month; or
  • Traffic or visitors to the e-commerce site exceeds 12,000 users per year or 1,000 users per month.

Luxury-Goods Sales Tax

The import of certain manufactured taxable goods may be liable to luxury-goods sales tax (LST). LST must be accounted every month together with VAT.

A summary of the LST rates is set out below.

Luxury-Goods Sales Tax in Indonesia


LST rates (%)

















Luxury residences such as luxury homes, town houses, condominiums, apartments, etc








Dirigibles, balloons, and other non-powered aircraft








Firearms and other arms, except for state purposes







Aircraft other than those for the state or commercial air-transport purposes








Luxury cruisers, except for the need of the state and public transport as well as yacht for tourism








Motor vehicles*


*The LST rates for motor vehicles are expected to change in October 2021.

Stamp duty

Individuals, companies, and other organizations in Indonesia must pay stamp duties on certain legal documents. As of January 2021, the standard stamp duty tax rate is 10,000 rupiah (US$0.70).

Previously, stamp duty was either 3,000 rupiah (US$0.20), 6,000 rupiah (US$0.40), or a combination of these rates. 

[tips title="Important Tip"]Indonesia requires stamp duties on two main types of documents: documents created to explain events of a civil nature and documents to be used as evidence in a court of law.[/tips]

Documents of a civil nature include the following:

  • Agreements, certificates, statement letters, and similar documents and their copies;
  • Notarial deeds and executorial deeds (grosse) and their copies;
  • Deeds made before a land deed officer (also known as a land conveyance officer) and their copies;
  • Securities in any form and name; and
  • Documents stating a sum of money above 5,000,000 rupiah (US$350), which describe the receipt of money or contain an acknowledgment of debt payment or settlement, either entirely or partially.

In addition to these documents, the Law also applies to the following civil documents:

  • Securities transaction documents, including futures contract transactions in any name or form;
  • Auction documents in the form of excerpts, minutes, copies, and minutes of auction executorial deeds (grosse); and
  • Other documents stipulated by Government Regulation.

The Law exempts the following documents from stamp duty:

  • Land transfer and building rights documents used for handling and restoring social conditions following natural disasters;
  • Land transfer and building rights documents used solely for religious or non-commercial activities;
  • Documents relating to the implementation of government programs and monetary or financial policies; and
  • Documents relating to the implementation of international agreements under binding international treaties or reciprocal laws.

Electronic stamp duty

Electronic stamps, which carry a unique code and description, will apply to electronic transaction documents with a value above 5,000,000 rupiah (US$350).

The Indonesian government, however, is still building the infrastructure to manage electronic stamp duties. 

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