About Value Added Tax

According to Article 4 the Law Number 18 of the year of 2000, there are several object of Indonesian VAT. They are :

• a supply of Taxable Goods by a Taxable Person for VAT purposes within the Custom Area of Indonesia;
• importation of Taxable Goods;
• rendering of Taxable Service by a Taxable Person for VAT purposes in the Customs Area of Indonesia;
• utilization of intangible Taxable Goods obtained from outside the Customs Area of Indonesia within the Customs Area;
• utilization of Taxable Service obtained from outside the Customs Area of Indonesia within the Customs Area; or
• exportation of Taxable Goods by a Taxable Person for VAT purposes.
  

Based on six kinds of VAT objects above, the VAT exists if the goods should meet the definition of Taxable Goods, the service should be in definition of Taxable Service, the goods or service consumption is in Customs Area in Indonesia and the seller must be Taxable Person (except for importation of goods, intangible goods, and service from abroad).
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Goods are tangible goods, which according to their nature and legal status are movable, or immovable goods, and intangible assets. Taxable Goods are goods, which according to their nature and legal status are movable, or immovable, and intangible assets, which are subject to VAT. Services are any service activity under a contractual agreement or legal arrangement which makes available for use goods, facilities or rights, including services provided on order or request, for which the material is provided by the customer. Taxable Services are a service which are subject to tax according to this Law. So, all goods and services are taxable except the law say the contrary.
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Customs Area is the Territory of the Republic of Indonesia, which covers land, sea, and air as well as specific areas within the Exclusive Economic Zone and the Continental Shelf within which Law Number 10 Year 1995 on Customs apply. The meaning of customs are is important beacuse VAT is imposed to goods or service that are in customs area only. In other words, the consumption in outside customs are is not object of Indonesian VAT.
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Taxable Person for VAT purposes is a Firm which supplies Taxable Goods and or renders Taxable Services which are subject to tax according to VAT Law, excluding small firms with a turnover not exceeding a limit determined by the Minister of Finance Decree, but including small firms which choose to be confirmed as Taxable Person for VAT purposes. Firm is an individual or an entity, which in the course of business or work, produces goods, imports goods, exports goods, engages in trading activities, utilises intangible goods obtained from outside the Customs Area, provides business services, or utilities services obtained from outside the Customs Area. Entity is a group of individual and or capital as a union, whether conducts or not conduct business activity, covering a limited company, partnership, other partnership, a State owned enterprise or company owned by a Regional Government in whatever name and form, “firma", "kongsi", "cooperative", permanent establishment, foundation or such kind of organisations, institute and other business form.
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The Value Added Tax rate is 10% (ten percent). The Value Added Tax rate on the export of Taxable Goods is 0% (zero percent). The amount of VAT is found by multiplying tax rate to tax base. Tax Base is the Sales Price or Consideration or Import Value or Export Value, or such other value as may be determined by the Minister of Finance Decree, to be used as the basis for calculating tax payable. Sales Price is the value in money, including all costs charged or which should be charged by a seller, on supply of Taxable Goods, excluding tax withheld in accordance with this law and any rebate which is written in the Tax Invoice. Import value is the value in money, which forms the basis for calculating import duty plus other levies incurred under the Customs Regulations on the import of Taxable Goods, excluding tax withheld in accordance with this law. Export value is the value in money, including all costs charged or should be charged by an exporter