Last Updated : December 2025
Value Added Tax (PPN—Pajak Pertambahan Nilai) is one of Indonesia’s most important indirect taxes, generating significant government revenue while affecting nearly every business transaction in the country. As of 2025, the tax landscape for VAT has undergone substantial changes designed to balance economic growth with increased government revenue, particularly following the implementation of Minister of Finance Regulation No. 131 of 2024 (PMK 131/2024). This comprehensive guide covers everything business owners, accountants, digital service providers, and entrepreneurs need to know about VAT registration, calculation, compliance, refunds, and the latest regulatory updates—all grounded in official government sources and practical examples.
Value Added Tax is an indirect consumption tax levied on the supply of goods and services in Indonesia. Rather than taxing profit at a single point in the production chain, VAT operates on an input-output credit mechanism: businesses pay VAT on purchases (input tax) and collect VAT on sales (output tax), remitting only the difference to the government. This design prevents tax cascading and ensures the tax burden ultimately falls on the final consumer. The Directorate General of Taxes (DGT—Direktorat Jenderal Pajak), Indonesia’s primary tax authority operating under the Ministry of Finance, administers and enforces all VAT regulations.
Unlike income tax, which applies to profits, VAT applies to the transaction value of goods and services. A manufacturing company might pay VAT on raw materials (input tax), then collect VAT from customers when selling finished products (output tax). The net VAT remitted to the government is the difference. This mechanism encourages compliance throughout the supply chain and supports exports by allowing zero-rated VAT treatment.
Indonesia’s VAT rate structure underwent significant changes effective January 1, 2025, following the Tax Harmonization Law (Law No. 7 of 2021) and the subsequent implementation of PMK 131/2024. Understanding these rates is critical for proper tax compliance.
The 11% Standard Rate for Non-Luxury Goods and Services
For the vast majority of taxable transactions—all non-luxury goods and services—the effective VAT rate remains 11%. While the nominal rate increased to 12% in 2025, the government implemented a mathematical adjustment to maintain the effective burden at 11%. The calculation formula is: 12% × (11/12) × selling price = 11% effective VAT rate.
Practical Example for Non-Luxury Goods:
Product selling price: IDR 10,000,000
Tax base calculation: (11/12) × IDR 10,000,000 = IDR 9,166,667
VAT payable: IDR 9,166,667 × 12% = IDR 1,100,000
Effective rate: IDR 1,100,000 ÷ IDR 10,000,000 = 11%
This formula applies to non-luxury goods including electronics, textiles, construction materials, and most consumer products delivered domestically or imported.
The 12% Rate for Luxury Goods (Full Application from February 2025)
Luxury goods subject to Indonesia’s Sales Tax on Luxury Goods (PPnBM—Pajak Penjualan atas Barang Mewah) include luxury motor vehicles, yachts, private aircraft, and certain high-end residential properties. A transitional period applied during January 2025, but starting February 1, 2025, the full 12% VAT rate applies to luxury goods without adjustment.
Exports of goods and services are subject to 0% VAT, allowing Indonesian businesses to remain competitive globally. This zero-rating generates refund claims when exporters’ input tax exceeds output tax, a significant benefit for export-oriented industries.
Who Must Register for VAT?
Businesses are classified as VAT-taxable entrepreneurs (PKP—Pengusaha Kena Pajak) based on turnover thresholds and business activity:
Mandatory Registration: Annual turnover exceeds IDR 4.8 billion (approximately USD 289,000)
Voluntary Registration: Businesses below the threshold may voluntarily register to claim input tax credits
Immediate Registration: Foreign businesses establishing a permanent establishment (PE) in Indonesia must register from their first taxable transaction—no threshold applies
Digital Service Providers (PMSE): Non-resident foreign businesses providing digital services to Indonesian consumers must register if annual transactions exceed IDR 600 million or reach 12,000 transactions per year
Registration Process Through OSS (Online Single Submission)
VAT registration is completed through Indonesia’s centralized OSS system, which integrates all business licensing and tax registration requirements.
The OSS process includes:
Access the OSS portal at https://oss.go.id/ and register or log in with credentials
Select VAT registration from available permit options
Complete required forms with company information, ownership details, and business description
Submit documentation including KTP (ID card), NPWP (tax ID), business address proof, and bank information
Field verification by the local tax office (KPP) to confirm business operations
Receive VAT approval within 5 working days of field verification
Obtain access credentials for online VAT filing systems
After approval, the DGT provides VAT registration credentials required for invoicing and reporting.
Mandatory Electronic Invoicing for All VAT-Registered Businesses
Every VAT-registered taxpayer (PKP) must issue electronic tax invoices (e-Faktur Pajak) for all business transactions since 2016. The system is administered through the DGT’s official portal and integrates with Indonesia’s broader tax compliance infrastructure. As of January 2025, most taxpayers must use the Coretax system launched by the DGT, which consolidates invoicing, tax reporting, and payment processing into one platform.
E-Invoice Requirements and Components
Each electronic invoice must include:
Unique invoice serial number (NSFP) automatically issued by the Coretax system after DGT validation
Complete buyer and seller information including names, tax IDs (NPWP), and addresses
QR code generated and embedded by the e-Faktur system for verification
Transaction details including goods/services description, quantity, unit price, and tax amount
VAT calculation showing tax base and applicable VAT rate
Digital signature from an authorized company representative registered in the e-Invoice system
Filing and Compliance Deadlines
E-invoices must be uploaded to the Coretax system by the 15th of the following month for DGT approval. Invoices uploaded after this deadline are rejected and cannot be reported on VAT returns, creating significant compliance risk. The transition to Coretax is mandatory for all PKPs by the end of 2025, with only high-volume taxpayers eligible to continue using alternative systems (e-Faktur Desktop or host-to-host integration) beyond that date.
Official Reference: View the DGT’s e-invoicing regulations at https://pajak.go.id/ (Directorate General of Taxes official portal)
Indonesia’s VAT law provides extensive exemptions for essential goods, public services, and strategic industries. Understanding these exemptions is crucial for both business operations and compliance.
Completely Non-Taxable Goods
The following goods are never subject to VAT and cannot support input tax credits:
Agricultural and mining products extracted directly from the source (crude oil, natural gas, coal, gold ore, iron ore, copper ore)
Basic food commodities including rice, fresh meat, fish, eggs, fresh milk, vegetables, fruit, sugar, soybeans, and salt
Monetary gold held as foreign exchange reserves
Commercial paper and financial instruments
Completely Non-Taxable Services
These essential and public-oriented services carry no VAT:
Medical and health services (public and private medical care, health consultations, hospital services)
Educational services including tuition, courses, and training programs
Financial services including banking services, credit facilities, and investment services
Insurance services of all types
Public transportation services on land, water, and domestic air routes
Religious services (mosque services, temple ceremonies, etc.)
Government administrative services provided by public agencies
Hotel and catering services (food and beverages served in hotels and restaurants)
Postal services using stamps
Labor and employment services
Arts, entertainment, and broadcast services (non-advertising broadcasts)
Parking services
Public telephone services using coins
Because these services are non-taxable, businesses providing them cannot claim input VAT credits on related business expenses—a critical distinction from zero-rated exports, which do support refunds.
Special VAT Exemptions for Strategic Industries
Beyond general exemptions, Indonesia grants special exemptions for specific projects and industries:
Low-cost housing rental (less than 21m² and below specified price thresholds) and construction services for affordable housing
Port services for international shipping companies
Certain transport and related services supporting Indonesia’s shipping and aviation industries
Special economic zones and free trade zones subject to specific conditions
Official Reference: Government Regulation No. 49 of 2022 and Law No. 8 of 1983 (as amended by Law No. 42 of 2009) detail complete exemption lists. Access these through https://pajak.go.id/.
Understanding Input Tax Credits
Input VAT—tax paid on business purchases and expenses—may typically be credited against output VAT (tax collected from customers) in the same tax month. This is the core mechanism allowing VAT to be a true consumption tax.
Eligibility for VAT Refunds
A VAT refund (called “restitusi”) is the government payment to a business when input VAT exceeds output VAT. Common scenarios qualifying for refunds include:
Export transactions: Exports qualify for 0% VAT, generating excess input tax when a business exports
Capital investment projects: Large upfront capital purchases create high input VAT relative to early-stage sales
Overpayments: Correcting VAT overpayments from incorrectly issued invoices (particularly those issued at 12% instead of the effective 11% during early 2025)
Only VAT-registered businesses (PKP) may claim refunds; unregistered businesses cannot.
The VAT Refund Claim Process
Claiming a refund involves several procedural steps governed by DGT regulations:
File the monthly VAT return (SPT Masa PPN) electronically no later than the end of the following month after the tax period
Indicate refund request in the VAT return and submit a formal application letter to the local tax office (KPP)
Prepare supporting documentation:
Copies of all valid tax invoices (e-Faktur)
Customs clearance documents for imports
Sales contracts or invoices for exports
Payment proof and bank statements
Any additional forms requested by the tax office
DGT conducts field audit and verification of the claim—by law, this must be completed within 12 months
Receive refund disbursement to the business’s registered bank account after DGT approval
Expedited Refund Programs
Two categories of businesses qualify for accelerated refunds:
Exporters: May receive pre-audit refunds within 1 month instead of the standard 12-month review period
Golden taxpayers: Businesses classified as “fully compliant” by the DGT may receive accelerated processing
If the DGT fails to issue a refund decision within the legal 12-month timeframe, the claim is automatically approved by law—protecting businesses from indefinite administrative delays.
Important Note: If a VAT refund claim remains unprocesed beyond the statutory period, businesses may file administrative or court appeals to enforce their rights.
What is PMSE VAT?
PMSE (Trade Through Electronic Transactions—Perdagangan Melalui Sistem Elektronik) VAT applies to digital services, software, streaming content, and intangible goods supplied by foreign providers to Indonesian consumers. This regulation ensures that digital business models operating in Indonesia pay VAT equivalent to domestic competitors.
Registration Triggers for Digital Service Providers
Foreign digital businesses must register as VAT collectors (now called “other parties” under PER-12/2025) if they meet either threshold:
Transaction value: Annual transaction value with Indonesian customers exceeds IDR 600 million (approximately USD 36,000)
User traffic: More than 12,000 Indonesian users per year or 1,000 users per month
Alternative monthly trigger: IDR 50 million monthly transactions or 1,000 monthly users
Example: A foreign software company providing cloud services to Indonesian businesses would register as a PMSE VAT collector once annual revenue from Indonesian customers exceeds IDR 600 million.
PMSE VAT Rate Adjustment for 2025
Like domestic VAT, PMSE VAT now applies the 12% × 11/12 formula for an effective rate of 11% on non-luxury digital services. This aligns foreign digital businesses with the same effective tax burden as domestic businesses.
PMSE VAT Reporting Requirements (Updated 2025)
A significant change under PER-12/PJ/2025 is the acceleration from quarterly to mandatory monthly reporting:
Payment deadline: VAT must be remitted monthly to the DGT
Report submission: Businesses must file a VAT Periodic Return (SPT Masa PPN) electronically through the DGT portal by the end of the following month
Currency options: Foreign PMSE collectors may remit VAT in USD or IDR; domestic PMSE collectors must use IDR
Documentation: Each report must include transaction details (proof numbers, amounts, buyer data) substantiating VAT collection
PMSE Registration Process
Non-resident digital service providers registering for PMSE VAT must prepare:
Certificate of incorporation or business registration documents
Website, app, or platform URLs demonstrating Indonesian customer access
Product/service list
Authorized signatory ID and power of attorney (if applicable)
Company contact and banking details for payment
Registration is completed through the DGT’s online portal (part of the Coretax system) with appointment effective the month following approval.
Official Reference: PER-12/PJ/2025 (DGT Regulation on PMSE VAT) and PMK-37/2025 (Ministry of Finance appointment of PMSE collectors). View updates at https://pajak.go.id/.
January 2025 Transitional Period for VAT Invoices
The sudden implementation of PMK 131/2024 created a short transition period (January 1-31, 2025) during which both 12% and 11% invoices were considered valid for non-luxury goods, provided they included all required invoice information. After January 31, 2025, only invoices applying the 11/12 formula for non-luxury goods are accepted.
Grace Period for Correction (January-March 2025)
Businesses that issued incorrect invoices during the transition period have until March 31, 2025 to correct and reissue them without penalty. Overcollected VAT on non-luxury goods can be refunded through a formal VAT adjustment process.
Implications for Retailers and End-Consumer Sales
The VAT treatment for luxury goods delivered directly to end consumers follows a specific schedule:
January 1-31, 2025: VAT = 12% × (11/12) × selling price = effective 11%
February 1, 2025 onward: VAT = 12% × selling price = full 12% rate
Retailers of luxury vehicles, yachts, and aircraft should ensure their invoicing systems transitioned correctly on February 1, 2025.
VAT Registration for Foreign Businesses with Indonesian Operations
Foreign companies establishing a permanent establishment (PE) in Indonesia—such as a branch office, warehouse, or representative office—must register for VAT from their first taxable transaction. There is no turnover threshold exemption; registration is mandatory upon generating VAT-taxable income.
Cross-Border E-Commerce and Marketplace VAT
Indonesia has strengthened VAT collection on e-commerce through several 2025 regulations:
PERPRES-68/2025 creates a state system for collecting VAT on overseas digital transactions
PMK-37/2025 appoints domestic and foreign electronic platform providers (PPMSE) as income tax collectors for marketplace transactions
PER-12/2025 updates PMSE VAT collection rules, requiring monthly reporting instead of quarterly
Online marketplaces connecting foreign sellers with Indonesian customers may be appointed by the DGT to collect and remit VAT on behalf of non-registered sellers.
Indonesia offers a VAT refund program for tourists and foreign visitors purchasing goods for export. This is distinct from business VAT refunds and operates under separate rules.
Eligible Goods and Minimum Purchase
Only physical goods purchased for personal use (carried as accompanied baggage) qualify for tourist VAT refunds. Services—including hotels, restaurants, transportation, and tours—do not qualify.
Refund Process for Tourists
Purchase from participating retailers: Ask the sales assistant to issue a valid tax invoice; look for the “VAT Refund for Tourist” logo
Prepare your claim online using the DGT’s tourist portal at **https://vatrefundapp.pajak.go.id/**
Create an account and sign in
Navigate to “Refunds” and create a new claim
Enter travel dates and select invoices to claim
Upload photos of purchased goods
Submit the claim
Visit the tax refund counter at the airport before departure with:
Passport
Boarding pass
Purchased goods in original condition
Receive your refund in cash (if ≤ IDR 5,000,000) or by bank transfer (if > IDR 5,000,000)
The refund by transfer is processed within 1 month after departure.
Official Tourist Refund Portal: https://vatrefundapp.pajak.go.id/ (Directorate General of Taxes)
Monthly VAT Return Filing
All VAT-registered businesses must file a monthly VAT return (SPT Masa PPN) electronically through the Coretax system by the end of the following month. Failure to file incurs penalties of IDR 100,000-5,000,000 depending on lateness.
Proper Invoice Issuance
E-invoices must be issued and uploaded to the Coretax system by the 15th of the following month. Incorrect or missing invoices prevent VAT crediting and reporting, resulting in audit risk and potential VAT assessment deficiencies.
Record Retention
All VAT-related documents—invoices, payment records, contracts, and transaction documentation—must be retained for 10 years for audit and compliance purposes.
Non-Compliance Penalties
Late VAT filing: 2% of tax amount per month (maximum 24 months)
Incomplete e-invoices: Invoices without full required information are rejected; businesses lose VAT credits and face audit
Non-issuance of e-invoices: Penalties of 1% of transaction value (selling price or import value)
False or fraudulent returns: Criminal penalties up to 5 years imprisonment and fines
Example 1: Non-Luxury Goods (Domestic Sale)
A textile manufacturer sells fabrics to a clothing retailer:
Selling price: IDR 100,000,000
Tax base: (11/12) × IDR 100,000,000 = IDR 91,666,667
VAT at 12%: IDR 91,666,667 × 0.12 = IDR 11,000,000
Effective rate: IDR 11,000,000 ÷ IDR 100,000,000 = 11%
The manufacturer issues an e-Faktur showing the adjusted tax base and 12% rate. The buyer (retailer) can claim this IDR 11,000,000 as input tax credit against their own output VAT.
Example 2: Export of Services (Zero-Rated)
An Indonesian software development company bills a foreign client USD 50,000 for custom application development. The export service qualifies for 0% VAT:
Service revenue: USD 50,000
VAT output: 0%
Input VAT on local costs: IDR 25,000,000 (from contractor payments, equipment, utilities, etc.)
Because output VAT is zero but input VAT is IDR 25,000,000, the company can claim a VAT refund of IDR 25,000,000 (assuming no other VAT-taxable income offsets this). The refund supports competitive pricing in international markets.
Example 3: PMSE Digital Service Provider
A foreign video streaming platform had IDR 700 million in annual revenue from Indonesian users. The company must register for PMSE VAT:
Annual revenue: IDR 700,000,000
VAT rate: 12% × 11/12 = effective 11%
Monthly average revenue: IDR 58,333,333
Monthly average VAT: IDR 58,333,333 × 11% ≈ IDR 6,400,000
Filing requirement: Monthly VAT reports due by the end of each following month
The platform reports this VAT through the DGT portal and remits it in USD or IDR per PER-12/2025.
For the most current and authoritative VAT information, consult these official DGT resources:
Directorate General of Taxes Official Portal: https://pajak.go.id/ — Access regulations, forms, guidance, and e-invoicing systems
Coretax e-Invoicing and Tax Reporting System: Accessible through the DGT portal; mandatory for all VAT-registered businesses
Tourist VAT Refund Application: https://vatrefundapp.pajak.go.id/ — For visitor VAT refunds
OSS (Online Single Submission) System: https://oss.go.id/ — For initial VAT registration
Key Regulations:
Minister of Finance Regulation No. 131/2024 (VAT rates and calculation formulas)
DGT Regulation PER-1/PJ/2025 (e-invoice technical instructions)
DGT Regulation PER-12/PJ/2025 (PMSE VAT collection updates)
DGT Decree KEP-24/PJ/2025 (e-invoice issuance for high-volume taxpayers)
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