Value Added Tax (VAT) is a type of tax that applies to the consumption of goods and services in Indonesia. VAT has been an important part of Indonesia’s tax system for a long time, and in 2022, the government changed the VAT rate to 11%. This policy came into effect on April 1, 2022, replacing the previous VAT rate of 10%. This change was made as part of the government’s efforts to increase state revenue and adjust to economic conditions. However, you might be wondering, what exactly is this 11% VAT and how is it calculated? In this article, we will discuss in detail about the 11% VAT rule, including how to calculate it that is simple and can be applied in everyday life, both for businesses and individuals.
What is VAT?
Before we discuss the change in VAT rate to 11%, let us first understand what VAT is. Value Added Tax (VAT) is a tax that applies to the consumption of goods and services within the country (customs area). VAT is an indirect tax, which means that entrepreneurs can charge the tax to other parties or end consumers.
VAT applies to almost all transactions of buying and selling goods and services, except for some types of goods and services that are exempted by law. Every stage of production and distribution will be subject to VAT, but ultimately, the burden of this tax will be borne by the final consumer.
VAT Rate Change to 11%
On April 1, 2022, the Indonesian government officially increased the VAT rate from 10% to 11%. This change is based on Law Number 7 of 2021 concerning Harmonization of Tax Regulations (HPP Law). This VAT rate increase is part of the government’s efforts to increase state revenue and encourage economic recovery after the COVID-19 pandemic.
This change in VAT rate applies to all transactions subject to VAT, except for certain types of goods and services that have special rates or are exempt from VAT. You need to understand these changes well, especially if you are an entrepreneur registered as a Taxable Entrepreneur (PKP).
Who is Required to Collect 11% VAT?
The obligation to collect 11% VAT falls on Taxable Entrepreneurs (PKP). PKP is an entrepreneur who delivers Taxable Goods (BKP) and/or Taxable Services (JKP) subject to tax under the VAT Law, excluding small entrepreneurs whose limits are determined by the Minister of Finance, except for small entrepreneurs who choose to be confirmed as PKP.
If you are an entrepreneur with a turnover exceeding IDR4.8 billion in one tax year, then you are obliged to register as a Taxable Person for VAT Purposes and collect VAT on the delivery of Taxable Goods and Services.
How to Calculate 11% VAT
Now, let’s discuss how to calculate 11% VAT. Basically, the VAT calculation is quite simple. Here is the basic formula:
Where:
- The current VAT rate is 11%
- The Tax Imposition Base (DPP) is the value in the form of money which is the basis for calculating the tax payable.
For more details, let’s look at some examples of 11% VAT calculations:
Example 1: Purchase of Goods
Suppose you buy a laptop for Rp10,000,000 (price before VAT). Then the VAT calculation is as follows:
So, the total you have to pay is:
Example 2: Delivery of Services
Let’s assume you are an IT consultant who provides website development services with a contract value of IDR 50,000,000 (excluding VAT). Then the VAT calculation is:
The total amount your client has to pay is:
Example 3: Transaction with Price Including VAT
Sometimes, you may come across a situation where the price listed includes VAT. In this case, you need to calculate backwards to find out the DPP and VAT. Suppose there is a product with a price of Rp110,000 (including VAT). The way to calculate it is:
= Rp110,000 – Rp99,099
= Rp10,901
VAT Exemptions and Facilities
- Non-Taxable Goods (Non-BKP) and Non-Taxable Services (Non-JKP) Some examples are basic necessities, education services, and health services.
- For example, the government exempts VAT for the import and delivery of certain transportation equipment and the delivery of simple houses.
An example of a VAT facility with no levy is when an entrepreneur delivers BKP/JKP in a Free Zone.
- The government bears the burden of VAT on certain goods/services within a certain period through the Government Borne VAT Facility (DTP) policy.
VAT liability related to 11% VAT
If you are a Taxable Entrepreneur (PKP), there are several obligations that you must fulfill related to the 11% VAT, namely:
- Collect VAT at 11% of the value of the delivery of the BKP/JKP that you do.
- Make Tax Invoice for each delivery of BKP/JKP.
- Reporting VAT collection and payment in the VAT Periodic Tax Return (SPT).
- Deposit the VAT that has been collected to the state treasury.
It is important to remember that delays in fulfilling these obligations can result in administrative sanctions in the form of fines.
Impact of 11% VAT on Consumers and Entrepreneurs
The increase in the VAT rate to 11% certainly has an impact on both consumers and entrepreneurs. This increase makes consumers have to pay a little more for the goods and services they consume. While a 1% increase may seem small, consumers need to realize that the impact can be quite significant, especially when making large purchases or for high-priced items. Therefore, consumers need to consider their spending strategies more carefully.
On the other hand, for entrepreneurs, especially those registered as taxable persons, this increase also brings its own challenges. In addition to having to make adjustments to selling prices, they need to pay more attention to recording transactions and tax reporting. Not only that, it is important for entrepreneurs to communicate these changes to their customers, to avoid misunderstandings that could affect business relationships.
Tips for Dealing with VAT Hikes
Here are some tips that you can apply in dealing with the VAT increase to 11%:
For Consumers:
- Be more careful in planning expenses and consumption.
- Check prices from several sellers before buying.
- Take advantage of promotions or discounts given by sellers
For Entrepreneurs:
- Make sure your recording and billing system is in line with the new VAT rate.
- Communicate price changes to customers clearly.
- Improve operational efficiency to minimize the impact of rising costs.
- Consider reviewing and adjusting the selling price if necessary.
KH Contact
The change in VAT rate to 11% is a government policy that aims to increase state revenue. Although it may feel burdensome in the short term, this policy is expected to provide long-term benefits to the national economy.
As a good citizen, it is important for you to understand this rule and apply it in your daily economic activities. For those of you who are interested in using VAT 11% consulting services, do not hesitate to communicate further with the professional team from Kontrak Hukum.
We provide Digital Business Assistant (DiBA), a solution specifically designed to make it easier for businesses to manage back office needs, from taxation, financial reporting, to various other aspects of business management.
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