Undang-Undang_2009_42-English

LAW OF THE REPUBLIC OF INDONESIANUMBER 42 OF 2009

ON

THIRD AMENDMENT OF LAW NUMBER 8 YEAR 1983REGARDING VALUED ADDED TAX ON GOODS AND SERVICES

AND LUXURY SALES TAX

BY THE GRACE OF ALMIGHTY GODTHE PRESIDENT OF THE REPUBLIC OF INDONESIA,

Considering:

a. that in order to further enhance legal certainty and justice, create a simpler tax system, and secure state revenues to ensure that national development may be carried out independently, it is necessary to amend Law Number 8 of 1983 regarding Valued Added Tax on Goods and Services and Luxury Sales Tax as amended several times, most recently by Law Number 18 of 2000 on Second Amendment of Law Number 8 of 1983 regarding Valued Added Tax on Goods and Services and Luxury Sales Tax;

b. that based on the considerations mentioned in letter a, it is necessary to establish a Law on Third Amendment of Law Number 8 of 1983 regarding Valued Added Tax on Goods and Services and Luxury Sales Tax;

In view of:

1. Article 5 paragraph (1), Article 20, and Article 23A of the 1945 Constitution of the Republic of Indonesia;

2. Law Number 6 of 1983 regarding General Provisions and Procedures for Taxation (State Gazette of the Republic of Indonesia for 1983 Number 49, Supplement to the State Gazette Number 3262) as amended several times, most recently by Law Number 16 of 2009 on Establishment of Government Regulation in Lieu of Law Number 5 of 2008 on Fourth Amendment of Law Number 6 of 1983 regarding General Provisions and Procedures for Taxation As a Law (State Gazette of the Republic of Indonesia for 2009 Number 62, Supplement to the State Gazette Number 4999);

3. Law Number 8 of 1983 regarding Value Added Tax on Goods and Services and Luxury Sales Tax (State Gazette of the Republic of Indonesia of 1983 Number 51, Supplement to the State Gazette Number 3264) as amended several times, most recently by Law Number 18 of 2000 on Second Amendment of Law Number 8 of 1983 regarding Value Added Tax on Goods and Services and Luxury Sales Tax (State Gazette of the Republic of Indonesia for 2000 Number 128, Supplement to the State Gazette Number 3986);

With the joint approval of

THE HOUSE OF REPRESENTATIVES OF THE REPUBLIC OF INDONESIAand

THE PRESIDENT OF THE REPUBLIC OF INDONESIA

HAS DECIDED:

To stipulate: LAW REGARDING THE THIRD AMENDMENT OF LAW NUMBER 8 OF 1983 REGARDING VALUE ADDED TAX ON GOODS AND SERVICES AND LUXURY SALES TAX.

Article I

A number of provisions in Law Number 8 of 1983 regarding Value Added Tax on Goods and Services and Luxury Sales Tax (State Gazette of the Republic of Indonesia of 1983 Number 51, Supplement to the State Gazette Number 3264), which has been amended several times through Laws:a. Number 11 of 1994 (State Gazette of the Republic of Indonesia for 1994 Number

61, Supplement to the State Gazette Number 3568);b. Number 18 of 2000 (State Gazette of the Republic of Indonesia for 2000 Number

128, Supplement to the State Gazette Number 3986); shall be amended as follows:

1. The provisions in Article 1 shall be amended to read as follows:

Article 1

In this Law, the following terms shall have the following definitions:

1. The Customs Zone shall be the territory of the Republic of Indonesia covering the land, water and airspace above it, as well as certain places within the Exclusive Economic Zone and the continental shelf where the Laws that regulate customs matters shall apply.

2. Goods shall be tangible goods, which by nature or by law are in the form of movable goods or immovable goods, and intangible goods.

3. Taxable Goods shall be goods that are subject to tax pursuant to this Law.

4. A Delivery of Taxable Goods shall be any activity of delivering Taxable Goods.

5. Services shall be any activities of services conducted pursuant to a commitment or legal act that causes certain goods, facilities or rights to be available for use, including services carried out in order to produce goods based on an order or request with materials from and on the instructions of the party making the order.

6. Taxable Services shall be services that are subject to tax pursuant to this Law.

7. The rendering of Taxable Services shall be any activity of rendering Taxable Services.

8. The use of Taxable Services from outside the Customs Zone shall be any activity of using Taxable Services from outside the Customs Zone within the Customs Zone.

9. An Import shall be any activity of bringing goods from outside Customs Zone into the Customs Zone.

10. The use of Intangible Taxable Goods from outside the Customs Zone shall be any activity of using Intangible Taxable Goods from outside the Customs Zone within the Customs Zone.

11. An Export of Tangible Taxable Goods shall be any activity of releasing Tangible Taxable Goods from within the Customs Zone to outside the Customs Zone.

12. Trade shall be business activity of buying and selling, including the exchange of goods, without changing the form or nature of such.

13. An Entity shall be a group of people and/or capital which forms a unit, whether involved in business activities or not, including limited liability companies, limited partnerships, other companies, State- and Regionally-Owned Enterprises in any name or form, firms, commercial associations, cooperatives, pension funds, partnerships, groups, foundations, mass organizations, sociopolitical organizations and other similar organizations, institutions and other forms of entities including collective investment contracts and permanent establishments.

14. An Entrepreneur shall be an individual or entity in any form whatsoever that in its business activities or employment produces goods, imports goods, exports goods, trades, uses intangible goods from outside the Customs Zone, renders services including the export of services, or uses services from outside the Customs Zone.

15. A Taxable Entrepreneur shall be an Entrepreneur that delivers Taxable Goods and/or renders Taxable Services that are subject to tax pursuant to this Law.

16. Production shall be the activity of processing to change the form and/or characteristics of certain goods from their original form to become new goods or goods with a new use or activity to process natural resources, including asking other individuals or entities to undertake said activities.

17. The Tax Assessment Base shall be the amount of the Selling Price, Service Fee, Import Value, Export Value or other value used as the basis for calculating the tax payable.

18. The Selling Price shall be the money value of the Taxable Goods delivered, including all costs which are charged or should be charged by the seller but not including the Value Added Tax collected pursuant to this Law and any discount stated on the Tax Invoice.

19. The Service Fee shall be the money value of Taxable Services rendered, export of Taxable Services, or export of Intangible Taxable Goods, including all costs which are charged or should be charged by the service provider but not including the tax collected pursuant to this Law and any discount stated on the Tax Invoice or the money value that is paid or should be paid by the Service Recipient for the use of Taxable Services and/or by the beneficiary of Intangible Taxable Goods for the use of Intangible Taxable Goods from outside the Customs Zone within the Customs Zone.

20. The Import Value shall be the money value of the imported Taxable Goods which constitutes the base for assessing the import duty plus other charges based on the provisions of customs and excise legislation, but not including Value Added Tax and Sales Tax on Luxury Goods collected according to this Law.

21. A Buyer shall be an individual or entity that receives or should receive a delivery of Taxable Goods and that pays or should pay the price of said Taxable Goods.

22. A Service Recipient shall be an individual or entity that receives or should receive Taxable Services rendered and that pays or should pay a Service Fee for said Taxable Services.

23. A Tax Invoice shall be proof of tax collection and shall be made by a Taxable Entrepreneur delivering Taxable Goods or rendering Taxable Services.

24. Input Tax shall be the Value Added Tax which should have been paid by a Taxable Entrepreneur as a result of an acquisition of Taxable Goods and/or a receipt of Taxable Services and/or the use of Intangible Taxable Goods from outside the Customs Zone and/or the use of Taxable Services from outside the Customs Zone and/or the import of Taxable Goods.

25. Output Tax shall be the Valued Added Tax payable which must be collected by a Taxable Entrepreneur delivering Taxable Goods, rendering Taxable Services, exporting Tangible Taxable Goods, exporting Intangible Taxable Goods, and/or exporting Taxable Services.

26. The Export Value shall be the money value, including all costs which are charged or should be charged by the exporter.

27. A Collector of Value Added Tax shall be a government treasurer, an entity, or a government agency appointed by the Minister of Finance to collect, deposit and report the tax payable by a Taxable Entrepreneur on the delivery of Taxable Goods and/or the rendering of Taxable Services to said government treasurer, entity or government agency.

28. Export of Intangible Taxable Goods shall be every activity of use of Intangible Taxable Goods from within the Customs Zone outside the Customs Zone.

29. Export of Taxable Services shall be every activity of rendering of Taxable Services outside the Customs Zone.

2. The provisions of Article 1A shall be revised to read as follows:

Article 1A

(1) The definition of the delivery of Taxable Goods shall cover:

a. the delivery of title to Taxable Goods based on a contract;

b. the transfer of Taxable Goods based on a leasing agreement;

c. the delivery of Taxable Goods to a broker or through an auctioneer;

d. own use and/or donation of Taxable Goods free of charge;

e. Taxable Goods in the form of inventory and/or assets that were not originally intended for trading, which remain at the time a company is dissolved;

f. the delivery of Taxable Goods from a head office to a branch or vice versa and/or the delivery of Taxable Goods between branches;

g. the delivery of Taxable Goods through consignment; and

h. the delivery of Taxable Goods by a Taxable Entrepreneur in the context of a financing agreement conducted on the basis of sharia principles, which delivery is considered to be directly from the Taxable Entrepreneur to the party that needs the Taxable Goods.

(2) The definition of a delivery of Taxable Goods shall not include:

a. the delivery of Taxable Goods to a broker as intended under the Commercial Code;

b. the delivery of Taxable Goods as collateral for a loan;

c. the delivery of Taxable Goods as intended under paragraph (1) letter f if a Taxable Entrepreneur performs centralization of the location at which tax is payable;

d. the transfer of Taxable Goods in the context of a business merger, consolidation, expansion, split, or takeover provided

that the party making the transfer and the party receiving the transfer are Taxable Entrepreneurs; and

e. Taxable Goods in the form of assets that were not originally intended to be traded, which remain at the time a company is dissolved, and the Input Tax on whose acquisition was not creditable as mentioned in Article 9 paragraph (8) letter b and letter c.

3. The provisions in Article 3A shall be amended to read as follows:

Article 3A

(1) An Entrepreneur that makes a delivery as intended under Article 4 paragraph (1) letter a, letter c, letter f, letter g, or letter h, except for a small-scale entrepreneur, the limitations for which shall be stipulated by the Minister of Finance, must report its business in order to be confirmed as a Taxable Entrepreneur and must collect, deposit and report the Value Added Tax and Luxury Sales Tax payable.

(1a) A small-scale entrepreneur as mentioned in paragraph (1) may choose to be confirmed as a Taxable Entrepreneur.

(2) A small-scale entrepreneur that chooses to be confirmed as a Taxable Entrepreneur must implement the provisions as mentioned in paragraph (1).

(3) An individual or entity using Intangible Taxable Goods from outside the Customs Zone as intended under Article 4 paragraph (1) letter d and/or using Taxable Services from outside the Customs Zone as intended under Article 4 paragraph (1) letter e must collect, deposit and report the Valued Added Tax payable, the assessment and procedure of which shall be stipulated through a Regulation of the Minister of Finance.


Article 4

(1) Value Added Tax shall be imposed on:

a. the delivery of Taxable Goods within the Customs Zone by an entrepreneur;

b. the import of Taxable Goods;

c. the rendering of Taxable Services within the Customs Zone by an entrepreneur;

d. the use within the Customs Zone of Intangible Taxable Goods from outside the Customs Zone;

e. the use within the Customs Zone of Taxable Services from outside the Customs Zone;

f. the export of Tangible Taxable Goods by a Taxable Entrepreneur;

g. the export of Intangible Taxable Goods by a Taxable Entrepreneur; and

h. the export of Taxable Services by a Taxable Entrepreneur.

(2) Provisions regarding the limits of activities and types of Taxable Services whose export is subject to Value Added Tax as mentioned in paragraph (1) letter h shall be stipulated through a Regulation of the Minister of Finance.


Article 4A

(1) Deleted.

(2) The types of goods exempt from Value Added Tax shall be certain goods in the following classifications of goods:

a. goods produced from mining or from drilling that are extracted directly from the source;

b. basic commodities vital to the general public;

c. food and beverages served at hotels, restaurants, cafés, food stalls and so forth, including food and beverages whether consumed on the premises or not, including food and beverages delivered by catering businesses; and

d. money, gold bars and commercial papers.

(3) The types of service exempt from Value Added Tax shall be certain services in the following classifications of services:

a. medical health care services;

b. social services;

c. postal services using stamps;

d. financial services;

e. insurance services;

f. religious services;

g. educational services;

h. artistic and entertainment services;

i. non-commercial broadcasting services;

j. public transportation services on land and water as well as domestic air transportation services that are an inseparable part of foreign air transportation services;

k. employment services;

l. hotel services;

m. services provided by the government in respect of carrying out general administration;

n. parking space provision services;

o. public telephone services using coins;

p. money transfer services using postal money orders; and

q. catering services.


Article 5

(1) In addition to the Value Added Tax imposed as mentioned in Article 4 paragraph (1), Luxury Sales Tax shall also be imposed on:

a. the delivery of Taxable Goods categorized as luxuries by the entrepreneur producing said goods within the Customs Zone in respect of its business or occupation; and

b. the import of Taxable Goods categorized as luxuries.

(2) Luxury Sales Tax shall be imposed only once at the time of the delivery of the Luxury Taxable Goods by the producing entrepreneur or at the time of import of the Luxury Taxable Goods.


Article 5A

(1) Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods on the delivery of Taxable Goods that are returned may be deducted from the Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods owed in the Tax Period when the return of said Taxable Goods occurs.

(2) Value Added Tax on rendering of Taxable Services that are cancelled, either in whole or in part, may be deducted from the Value Added Tax owed in the Tax Period when said cancellation occurs.

(3) Provisions regarding the procedure for deduction of Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods as mentioned in paragraph (1) and deduction of Value Added Tax as mentioned in paragraph (2) shall be stipulated through Regulation of the Minister of Finance.

8. The provisions in Article 7 paragraph (2) and paragraph (3) shall be amended such that Article 7 reads as follows:

Article 7

(1) The Value Added Tax Tariff shall be 10% (ten percent).

(2) A Value Added Tax Tariff of 0% (zero percent) shall be applied on:

a. export of Tangible Taxable Goods;

b. export of Intangible Taxable Goods; and

c. export of Taxable Services.

(3) The tax tariff as mentioned in paragraph (1) may be revised to a minimum of 5% (five percent) and a maximum of 15% (fifteen percent), which changes in rate shall be stipulated through a Government Regulation


Article 8

(1) The Luxury Sales Tax tariff shall be set at no lower than 10% (ten percent) and no higher than 200% (two hundred percent).

(2) Tax with a tariff of 0% (zero percent) shall be imposed on the export of Luxury Taxable Goods.

(3) Provisions on the classifications of Taxable Goods categorized as luxuries that are subject to Luxury Sales Tax at the tariffs as mentioned in paragraph (1) shall be stipulated through a Government Regulation.

(4) Provisions on the types of goods subject to Sales Tax on Luxury Goods as mentioned in paragraph (3) shall be stipulated through or on the basis of a Regulation of the Minister of Finance.

10. Between Article 8 and Article 9 one (1) new article shall be inserted, Article 8A, which shall read as follows:

Article 8A

(1) Value Added Tax payable shall be calculated by multiplying the tariffs as mentioned in Article 7 by the Tax Assessment Base, which includes Selling Price, Service Fee, Import Value, Export Value or other value.

(2) Provisions regarding other value as mentioned in paragraph (1) shall be stipulated through or on the basis of a Regulation of the Minister of Finance.

11. The provisions in Article 9 paragraph (1) shall be deleted, paragraph (2), paragraph (2a), paragraph (3), paragraph (4), paragraph (5), paragraph (6), paragraph (7), paragraph (8), paragraph (13) and paragraph (14) shall be amended, one new paragraph shall be inserted between paragraph (2a) and

paragraph (3) to become paragraph (2b), six new paragraphs shall be inserted between paragraph (4) and paragraph (5) to become paragraph (4a) through paragraph (4f), two new paragraphs shall be inserted between paragraph (6) and paragraph (7) to become paragraph (6a) and paragraph (6b), and two new paragraphs shall be inserted between paragraph (7) and paragraph (8) to become paragraph (7a) and paragraph (7b), such that Article 9 shall read as follows:

Article 9

(1) Deleted.

(2) The Input Tax in any one Tax Period shall be credited with the Output Tax in the same Tax Period.

(2a) For a Taxable Entrepreneur that is not yet producing such that it has not yet made deliveries on which tax is payable, the Input Tax on procurement and/or import of capital goods shall be creditable.

(2b) The Input Tax that is credited must use a Tax Invoice that fulfills the requirements as mentioned in Article 13 paragraph (5) and paragraph (9).

(3) If the Output Tax is greater than the Input Tax during any one Tax Period, the difference shall constitute the Value Added Tax which the Entrepreneur must pay.

(4) If the creditable Input Tax is greater than the Output Tax in any Tax Period, the difference shall constitute overpaid tax which may be set off against the tax in the subsequent Tax Period.

(4a) For overpaid Input Tax as mentioned in paragraph (4), a request for refund may be submitted at the end of the fiscal year.

(4b) Notwithstanding the provisions as mentioned in paragraph (4) and paragraph (4a), a request for refund of overpaid Input Tax may be submitted in each Tax Period by:

a. a Taxable Entrepreneur that makes exports of Tangible Taxable Goods;

b. a Taxable Entrepreneur that makes deliveries of Taxable Goods and/or renders Taxable Services to a Value Added Tax Collector;

c. a Taxable Entrepreneur that makes deliveries of Taxable Goods and/or renders Taxable Services on which Value Added Tax is not collected;

d. a Taxable Entrepreneur that makes exports of Intangible Taxable Goods;

e. a Taxable Entrepreneur that makes exports of Taxable Services; and/or

f. A Taxable Entrepreneur in the pre-production stage as mentioned in paragraph (2a).

(4c) Refund of overpaid Input Tax to a Taxable Entrepreneur as mentioned in paragraph (4b) letter a through letter e, which has the criteria as a low-risk Taxable Entrepreneur, shall be done through a preliminary refund of overpaid tax as mentioned in Article 17C paragraph (1) of Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments.

(4d) Provisions regarding low-risk Taxable Entrepreneurs who shall be granted preliminary refund of overpaid tax as mentioned in paragraph (4c) shall be stipulated through Regulation of the Minister of Finance.

(4e) The Director General of Taxation may conduct audits of Taxable Entrepreneurs as mentioned in paragraph (4c) and issue tax assessment notices after making preliminary refunds of overpaid tax.

(4f) If, based on the results of an audit as mentioned in paragraph (4e), the Director General of Taxation issues an Underpaid Tax Assessment Notice, the amount of tax underpayment shall be increased by administrative penalty in the form of interest as mentioned in Article 13 paragraph (2) of Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments.

(5) If, in any one Tax Period, a Taxable Entrepreneur not only makes a delivery on which tax is payable, but also a delivery on which tax is not payable, provided that the part of the delivery on which tax is payable can be ascertained exactly from the accounts, the amount of the creditable Input Tax shall be the Input Tax in connection with the delivery on which tax is payable.

(6) If, in any one Tax Period, a Taxable Entrepreneur not only makes a delivery on which tax is payable, but also a delivery on which tax is not payable, while the Input Tax for the delivery on which tax is payable cannot be ascertained exactly, the amount of the creditable Input Tax shall be calculated using guidelines stipulated in a Regulation of the Minister of Finance.

(6a) Input Tax that has been credited as mentioned in paragraph (2a) and that has been refunded must be repaid by the Taxable Entrepreneur in the case that the Taxable Entrepreneur experiences failure to produce within a maximum of three (3) years from the start of the Tax Period when the Input Tax was credited.

(6b) Provisions regarding determination of times, calculations, and procedures for repayment as mentioned in paragraph (6a) shall be stipulated through or on the basis of a Regulation of the Minister of Finance.

(7) The amount of the Input Tax creditable by a Taxable Entrepreneur whose turnover during one (1) year does not exceed a certain amount, except for a Taxable Entrepreneur as mentioned in paragraph (7a), may be calculated using guidelines for calculating the crediting of Input Tax.

(7a) The amount of the Input Tax creditable by a Taxable Entrepreneur that conducts certain business activities shall be calculated using guidelines for calculating the crediting of Input Tax.

(7b) Provisions regarding turnover as mentioned in paragraph (7), certain business activities as mentioned in paragraph (7a), and guidelines for calculating the crediting of Input Tax as mentioned in paragraph (7) and paragraph (7a) shall be stipulated through or on the basis of a Regulation of the Minister of Finance.

(8) Crediting of Input Tax as mentioned in paragraph (2) shall not apply for expenditures for:

a. the acquisition of Taxable Goods or Taxable Services prior to the entrepreneur being confirmed as a Taxable Entrepreneur;

b. the acquisition of Taxable Goods or Taxable Services not directly related to business activities;

c. the acquisition and maintenance of sedans and station wagons, unless these constitute goods for trade or rental;

d. the use of Intangible Taxable Goods or use of Taxable Services from outside the Customs Zone prior to the entrepreneur being confirmed as a Taxable Entrepreneur;

e. deleted;

f. the acquisition of Taxable Goods or Taxable Services whose Tax Invoice does not fulfill the provisions as mentioned in Article 13 paragraph (5) or paragraph (9) or does not state the name, address, and Tax ID Number of the purchaser of the Taxable Goods or recipient of the Taxable Services;

g. the use of Intangible Taxable Goods or the use of Taxable Services from outside the Customs Zone whose Tax Invoice does not fulfill the provisions as mentioned in Article 13 paragraph (6);

h. the acquisition of Taxable Goods or Taxable Services whose Input Tax is collected through the issuance of a tax assessment;

i. the acquisition of Taxable Goods or Taxable Services whose Input Tax is not reported in the Periodic Value Added Tax Returns, which fact is discovered at the time of an audit; and

j. the acquisition of Taxable Goods other than capital goods or Taxable Services before the Taxable Entrepreneur starts production as mentioned in paragraph (2a).

(9) Input Tax which is creditable but which has not been credited with the Output Tax in the same Tax Period may be credited in a subsequent Tax Period no later than 3 (three) months after the end of the Tax Period concerned, provided that it has not been charged as a cost and no audit has been conducted.

(10) deleted.

(11) deleted.

(12) deleted.

(13) Provisions regarding the calculation and procedure for refunds of overpaid Input Tax as mentioned in paragraph (4a), paragraph (4b), and paragraph (4c) shall be stipulated through or on the basis of a Regulation of the Director General of Taxation.

(14) In the event of transfer of Taxable Goods in the context of a business merger, consolidation, expansion, breakup, or takeover, Input Tax on the Taxable Goods that are transferred which has not been credited by the Taxable Entrepreneur making the transfer may be credited by the Taxable Entrepreneur receiving the transfer, provided that the Tax Invoices are received after the transfer takes place and the Input Tax has not been charged as a cost or capitalized.

12. The provisions in Article 11 paragraph (1) and the Elucidation of paragraph (2) shall be amended so that Article 11 reads as follows:

Article 11

(1) Tax shall be payable at the time of:

a. a delivery of Taxable Goods;

b. an import of Taxable Goods;

c. a delivery of Taxable Services;

d. the use of Intangible Taxable Goods from outside the Customs Zone;

e. the use of Taxable Services from outside the Customs Zone;

f. the export of Tangible Taxable Goods;

g. the export of Intangible Taxable Goods; or

h. the export of Taxable Services.

(2) If payment is received prior to the delivery of the Taxable Goods or the delivery of Taxable Services, or if the payment is made prior to the commencement of the use of Intangible Taxable Goods or Taxable Services from outside the Customs Zone, the time at which tax shall be payable shall be the time of payment.

(3) Deleted.

(4) The Director General of Taxation may stipulate another time as the time at which tax is payable, if it is difficult to stipulate the time at which tax is payable or if a change in the provisions might result in injustice.

(5) Deleted.

13. The provisions in Article 12 paragraph (1), paragraph (2), and paragraph (4) shall be amended so that Article 12 shall read as follows:

Article 12

(1) A Taxable Entrepreneur that makes a delivery as intended under Article 4 paragraph (1) letter a, letter c, letter f, letter g, and/or letter h shall be liable for tax in the place of residence or domicile and/or the place where business activities are conducted or another place other than the place of residence or domicile and/or the place where business activities are conducted that is designated through a Regulation of the Director General of Taxation.

(2) Based on a written notification from a Taxable Entrepreneur, the Director General of Taxation may designate one or more places as the location at which tax is payable.

(3) In the case of an import, the tax shall be payable at the location at which the Taxable Goods are imported, and shall be collected through the Directorate General of Customs and Excise.

(4) An individual or entity that uses Intangible Taxable Goods and/or Taxable Services from outside the Customs Zone within the Customs Zone as intended under Article 4 paragraph (1) letter d and letter e shall be liable for tax in the place of residence or domicile and/or the place of business activities.

14. The provisions in Article 13 shall be amended so that Article 13 reads as follows:

Article 13

(1) A Taxable Entrepreneur must make out a Tax Invoice for each:

a. delivery of Taxable Goods as intended under Article 4 paragraph (1) letter a or letter f and/or Article 16D;

b. delivery of Taxable Services as intended under Article 4 paragraph (1) letter c;

c. export of Intangible Taxable Goods as intended under Article 4 paragraph (1) letter g; and/or

d. export of Taxable Services as intended under Article 4 paragraph (1) letter h.

(1a) The Tax Invoice as mentioned in paragraph (1) must be produced at:

a. the time of delivery of Taxable Goods and/or delivery of Taxable Services;

b. the time of receipt of payment, in the case that payment is received before the delivery of Taxable Goods and/or delivery of Taxable Services;

c. the time of receipt of installment payment in the case of delivery of each stage of work; or

d. other time, which shall be stipulated through or on the basis of a Regulation of the Minister of Finance.

(2) Notwithstanding the provisions as mentioned in paragraph (1), a Taxable Entrepreneur may make out one Tax Invoice to cover all deliveries made to the same buyer of Taxable Goods or recipient of Taxable Services in one calendar month.

(2a) The Tax Invoice as mentioned in paragraph (1) must be produced no later than the end of the month of the deliveries.

(3) Deleted.

(4) Deleted.

(5) A Tax Invoice must state information on the delivery of Taxable Goods and/or the delivery of Taxable Services which shall include at least the following:

a. The name, address and Registration Number of the Taxpayer delivering the Taxable Goods or Taxable Services;

b. The name, address and Registration Number of the Taxpayer buying the Taxable Goods or receiving the Taxable Services;

c. The types of goods or services, the Selling Price or Service Fee, and any discount;

d. The Value Added Tax collected;

e. The Luxury Sales Tax collected;

f. The code, series number and date on which the Tax Invoice is made;

g. The name and signature of the person authorized to sign the Tax Invoice.

(6) The Director General of Taxation may designate certain documents as having the same status as Tax Invoices.

(7) Deleted.

(8) Further provisions regarding the procedures for producing Tax Invoices and the procedures for correcting or replacing Tax Invoices shall be stipulated through or on the basis of a Regulation of the Director General of Taxation.

15. Between Article 15 and Article 16 one (1) new article shall be inserted, Article 15A, which shall read as follows:

Article 15A

(1) Deposits of Value Added Tax by a Taxable Entrepreneur as mentioned in Article 9 paragraph (3) must be made no later than the end of the following month after the end of the Tax Period and before the Periodic Value Added Tax Return is lodged.

(2) Periodic Value Added Tax Returns shall be lodged no later than the end of the following month after the end of the Tax Period.

16. The provisions in Article 16B paragraph (1) shall be amended so that Article 16B shall read as follows:

Article 16B

(1) Non-collection of either part or all of the tax payable, or exemption from tax assessment, either temporarily or permanently, for:

a. activities in certain areas or certain places within the Customs Zone;

b. the delivery of certain Taxable Goods or the delivery of certain Taxable Services;

c. the import of certain Taxable Goods;

d. the use of certain Intangible Taxable Goods from outside the Customs Zone within the Customs Zone; and

e. the use of certain Taxable Services from outside the Customs Zone within the Customs Zone,

shall be stipulated through Government Regulation.

(2) The Input Tax paid for the acquisition of Taxable Goods and/or the acquisition of Taxable Services on the delivery of which Value Added Tax is not collected shall be creditable.

(3) The Input Tax paid for the acquisition of Taxable Goods and/or the acquisition of Taxable Services whose delivery is exempt from Value Added Tax shall not be creditable.

17. The provisions in Article 16D shall be amended to read as follows:

Article 16D

Value Added Tax shall be imposed on the delivery of Taxable Goods in the form of assets that were not originally intended to be traded by the Taxable Entrepreneur, except for deliveries of assets whose Input Tax is not creditable as mentioned in Article 9 paragraph (8) letter b and letter c.

18. Between Article 16D and Article 17 two (2) new articles shall be inserted, Article 16E and Article 16F, which shall read as follows:

Article 16E

(1) Value Added Tax and Luxury Sales Tax that has been paid on the purchase of Taxable Goods that are taken outside the Customs Zone by an individual who holds a foreign passport may be requested to be refunded.

(2) The Value Added Tax and Luxury Sales Tax that may be requested to be refunded as mentioned in paragraph (1) must fulfill the following conditions:

a. the value of the Value Added Tax shall be at least Rp 500,000 (five hundred thousand rupiah) and may be adjusted through Government Regulation;

b. the purchase of the Taxable Goods was made within a period of one (1) month before departure from the Customs Zone; and

c. the Tax Invoices shall fulfill the provisions as mentioned in Article 13 paragraph (5), except that the Taxpayer Registration Number column and buyer’s address column shall be filled in with the passport number and the full address in the country that issued the passport for sales to an individual foreign passport holder who does not have a Taxpayer Registration Number.

(3) The request for refund of Value Added Tax and Luxury Sales Tax as mentioned in paragraph (1) shall be made at the time the individual foreign passport holder leaves Indonesia and shall be submitted to the Director General of Taxation through the Directorate General of Taxation Office at airports designated by the Minister of Finance.

(4) The documents that must be shown at the time of request for refund of Value Added Tax and Luxury Sales Tax are as follows:

a. passport

b. boarding pass for the departure of the individual as mentioned in paragraph (1) to outside the Customs Zone; and

c. Tax Invoice as mentioned in paragraph (2) letter c.

(5) Provisions regarding the procedure for submitting and settling requests for refund of Value Added Tax and Luxury Sales Tax as mentioned in paragraph (1) shall be stipulated through or on the basis of Regulation of the Minister of Finance.

Article 16F

Buyers of Taxable Goods or recipients of Taxable Services are jointly and severally responsible for payment of tax, unless they can show evidence that the tax has been paid.

ARTICLE II

This law shall come into effect as of 1 April 2010.

For the purposes of public cognizance, this Law shall be promulgated in the State Gazette of the Republic of Indonesia.

Stipulated in Jakartaon 15 October 2009

PRESIDENT OF THE REPUBLIC OF INDONESIA,

signed

DR. H. SUSILO BAMBANG YUDHOYONO

Enacted in Jakartaon 15 October 2009

MINISTER OF JUSTICE AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA

signed

ANDI MATTALATTA

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2009 NUMBER 1150

ELUCIDATIONOF

LAW OF THE REPUBLIC OF INDONESIANUMBER 42 OF 2009

REGARDING

THE THIRD AMENDMENT OF LAW NUMBER 8 OF 1983 REGARDING VALUE ADDED TAX ON GOODS AND SERVICES

AND LUXURY SALES TAX

I. GENERAL

Value Added Tax is a tax on the consumption of goods and services in the Customs Zone that is imposed in stages in each channel of production or distribution. The imposition of Value Added Tax is strongly influenced by developments in business transactions and by the consumption patterns of the society that is the object of the Value Added Tax. The highly dynamic economic changes at the national, regional, and international levels and continually creating new types and patterns of business transactions. For example, in the services sector, many new types of service transactions have emerged, or modifications of previous transactions, for which the imposition of Value Added Tax is not yet stipulated in the Law on Value Added Tax.

In order to respond to these extremely rapid changes, revisions and refinements to the Value Added Tax Law are needed. The reform of the consumption tax system began with the issuance of Law Number 8 of 1983 on Value Added Tax on Goods and Services and Sales Tax on Luxury Goods. Steps for revision and refinement were continuously and consistently undertaken with the issuance of Law Number 11 of 1994 and most recently in 2000 with the issuance of Law Number 18 of 2000.

These changes to the Value Added Tax Law have the following objectives:

1. To increase legal certainty and justice in the imposition of Value Added Tax. Developments in business transactions, especially for services, have created new types and patterns of transactions whose assessment needs to be further confirmed in the Value Added Tax Law.

2. To simplify the Value Added Tax system.Simplification of the Value Added Tax system is done by altering or refining the provisions in the Value Added Tax Law that create difficulties for Taxpayers in implementing their tax rights and obligations

3. To reduce compliance costs.It is also hoped that the simplification of the Value Added Tax system will reduce costs, both administrative costs for Taxpayers in implementing their rights and obligations and the oversight costs expended by the Government in supervising Taxpayer compliance.

4. To increase Taxpayer compliance.

It is hoped that the achievement of this objective will increase the level of voluntary compliance by Taxpayers. A high level of voluntary compliance is expected to increase tax revenues, as reflected in an increase in the tax ratio.

5. Not to disrupt Value Added Tax revenues.In addition to the objectives above, the function of taxes as a source of state revenues remains an important consideration.

6. To reduce distortion and increase economic activity.

II. ARTICLE BY ARTICLE

ARTICLE I

Number 1Article 1

Self-explanatory

Number 2Article 1A

Paragraph (1)Letter a

The agreements as intended under this provision cover sales agreements, exchange agreements, installment sales agreements or any other agreement resulting in a transfer of rights to goods.

Letter bThe delivery of Taxable Goods may also occur as a result of a hire-purchase agreement and/or a leasing agreement.

The meaning of “delivery of Taxable Goods resulting from a leasing agreement” shall be a delivery of Taxable Goods resulting from a leasing agreement with option rights.

In the case of a delivery of Taxable Goods by a Taxable Entrepreneur in the context of a leasing agreement with option rights, the Taxable Goods are deemed to have been delivered directly from the Taxable Entrepreneur that is the supplier to the party that needs the goods (lessee).

Letter cThe meaning of “dealer-broker” shall be an individual or entity that, in respect of its business or occupation, on its own behalf, enters into an agreement or makes a commitment secured by another for a specified

remuneration or service fee, such as a commissioner. The meaning of “auctioneer” shall be a Government auctioneer or one appointed by the Government.

Letter d

“Own use” shall be defined as use for the entrepreneur’s own interest or that of its management or employees, of either self-produced goods or non-self produced goods.

“Donation free of charge” shall be defined as a donation made without payment of either self-produced goods or non-self-produced goods, such as providing samples of goods for promotional purposes to clients or buyers.

Letter e

Taxable Goods in the form of inventory and/or assets that were not originally intended for trade which remain unused at the time of the company’s dissolution shall be treated in the same way as own use, with the result that they shall be considered a delivery of Taxable Goods.

Exempted from the provision of this letter e are deliveries as mentioned in Article 1A paragraph (2) letter 3.

Letter f

If any company has more than one location at which tax is payable, whether this is a head office or a branch of the company, the transfer of Taxable Goods between these places constitutes a delivery of Taxable Goods.

The meaning of “head office” shall be the place of residence or place of domicile.

The meaning of “branch” shall include a business location, a representative office, a marketing unit, and similar places of business activities.

Letter h

Example:

In a murabahah transaction, the sharia bank acts as the provider of funds to buy a motor vehicle from Taxable Entrepreneur A upon the order of a customer of the sharia bank (Mr. B). Although, based on sharia principles, the sharia bank must first buy the motor vehicle and then sell it to Mr. B, pursuant to this Law the delivery of the motor vehicle is considered to be done directly by Taxable Entrepreneur A to Mr. B.


The meaning of “broker” shall be a broker as intended under the Commercial Code, namely an intermediary trader appointed by the President or by an official authorized by the President for said purpose. They operate by working for a specific remuneration or commission, on the basis of a mandate and on behalf of other people with whom they have no working relationship.

Letter bSelf-explanatory

Letter cIf a Taxable Entrepreneur has more than one business location, whether as the head office or branches of the company, and said Taxable Entrepreneur has submitted written notification to the Director General of Taxation, the movement of Taxable Goods from one business location activity to another business location (head office to branch or vice versa, or between branches) shall be considered not to be included in the definition of a delivery of Taxable Goods, except for Taxable Goods moved between locations at which tax is payable.

Letter dThe meaning of “business split” shall be a business separation as mentioned in the Law that regulates limited companies.

Letter e Taxable Goods in the form of assets that were not originally intended to be traded, which remain at the time a company is dissolved and the Input Tax on whose acquisition was not creditable because of not being directly related to business activities as mentioned in Article 9 paragraph (8) letter b and and/or assets in the form of sedans or station wagons the Input Tax on whose acquisition was not creditable as mentioned in Article 9 paragraph (8) letter c are not included in the definition of delivery of Taxable Goods.

Number 3Article 3A

Paragraph (1)

An Entrepreneur delivering Taxable Goods and/or rendering Taxable Services within the Customs Zone and/or exporting Tangible Taxable Goods, Taxable Services, and/or Intangible Taxable Goods must:

a. report its business in order to be confirmed as a Taxable Entrepreneur;

b. collect the tax payable;

c. deposit the Value Added Tax yet to be paid, if the Output Tax is greater than the creditable Input Tax, and deposit the Luxury Sales Tax payable; and

d. report the tax calculation.

The obligations above do not apply to small-scale entrepreneurs, the limits for which shall be determined by the Minister of Finance.

Paragraph (1a)Self-explanatory.

Paragraph (2)A small-scale entrepreneur shall be permitted to choose to be confirmed as a Taxable Entrepreneur. If a small-scale entrepreneur elects to become a Taxable Entrepreneur, this Law shall be fully effective for said small-scale entrepreneur.

Paragraph (3)The Value Added Tax payable on the use of Intangible Taxable Goods and/or the use of Taxable Services from outside the Customs Zone must be collected by the individual or entity using said Intangible Taxable Goods and/or Taxable Services.

Number 4Article 4


Entrepreneurs delivering Taxable Goods shall include Entrepreneurs already confirmed as Taxable Entrepreneurs as intended under Article 3A paragraph (1) and Entrepreneurs that should be confirmed as Taxable Entrepreneurs but that have not yet been confirmed as such.

A delivery of goods which incurs tax must meet the following requirements:

a. the tangible goods delivered constitute Taxable Goods;

b. the intangible goods delivered constitute Intangible Taxable Goods;

c. the delivery is made within the Customs Zone; and

d. the delivery is made in respect of its business activities or occupation.

Letter bTax shall also be collected at the time of the import of the Taxable Goods. The collection shall be made through the Directorate General of Customs and Excise.

Unlike a delivery of Taxable Goods as intended under letter a, whosoever imports Taxable Goods into the Customs Zone, irrespective of whether or not this is in respect of its business activities or occupation, shall remain subject to tax.

Letter cEntrepreneurs delivering Taxable Services shall include both entrepreneurs already confirmed as Taxable Entrepreneurs as intended under Article 3A paragraph (1) and entrepreneurs that should be confirmed as Taxable Entrepreneurs but that have not yet been confirmed as such.

A delivery of services that incurs tax must meet the following requirements:

a. the services delivered are Taxable Services,

b. the delivery is made within the Customs Zone, and

c. the delivery is made in respect of its business activities or occupation.

Included in the definition of delivery of Taxable Services are Taxable Services used for one's own interest and/or Taxable Services given free of charge.

Letter d

In order to provide the same tax assessment treatment as that for the import of Taxable Goods, Intangible Taxable Goods originating from outside the Customs Zone that are used by any party whatsoever within the Customs Zone shall also be subject to Value Added Tax.

Example:

Entrepreneur A, domiciled in Jakarta, obtains the right to use a brand belonging to Entrepreneur B, domiciled in Hong Kong. Value Added Tax shall be payable on the use of said brand by Entrepreneur A within the Customs Zone.

Letter eServices originating from outside the Customs Zone which are used by any party whatsoever within the Customs Zone shall be subject to Value Added Tax.

For example, Taxable Entrepreneur C in Surabaya uses Taxable Services from Entrepreneur D, domiciled in Singapore. Value Added Tax shall be payable on the use of said Taxable Services.

Letter fUnlike entrepreneurs that conduct activities as intended under letter a and/or letter c, entrepreneurs exporting Tangible Taxable Goods shall be only entrepreneurs already confirmed as Taxable Entrepreneurs as intended under Article 3A paragraph (1).

Letter gAs with the activity of exporting Tangible Taxable Goods, entrepreneurs that export Intangible Taxable Goods shall be only entrepreneurs already confirmed as Taxable Entrepreneurs as intended under Article 3A paragraph (1).

The meaning of “Intangible Taxable Goods” shall be:

1. the use of or right to use copyright in the sectors of literature, arts or scientific works, patents, designs or models, plans, secret formulas or processes, trademarks, or other similar forms of intellectual/ industrial property rights or other similar rights;

2. the use of or right to use industrial, commercial, or scientific equipment/ apparatus;

3. the provision of knowledge or information in the scientific, technical, industrial, or commercial sectors;

4. the provision of additional or complementary assistance in connection with the use of or right to use the rights mentioned in number 1, the use of or right to use equipment/apparatus mentioned in number 2, or the provision of knowledge or information mentioned in number 3, in the form of:

a. receipt of or the right to receive picture recordings or sound recordings or both, which are distributed to the public by satellite, cable, fiber optics, or similar technology;

b. use of or the right to use picture recordings or sound recordings or both, for television or radio broadcasts that are broadcast/ relayed

through satellite, cable, fiber optics, or similar technology; and

c. the use of or right to use part or all of a communication radio spectrum;

5. the use of or right to use motion picture films, video films or tapes for television broadcast, or audio tapes for radio broadcast; and

6. the release of all or part of rights associated with the granting of intellectual/ industrial property rights or other rights as mentioned above.

letter h

Included in the definition of export of Taxable Services shall be the delivery of Taxable Services from within the Customs Zone to outside the Customs Zone by a Taxable Entrepreneur that exports Tangible Taxable Goods on the basis or orders or requests with material from and on the instruction of an orderer from outside the Customs Zone.

Paragraph (2)

Self-explanatory

Number 5Article 4A

Paragraph (1)Self-explanatory


The meaning of goods from mining or drilling which are extracted directly from the source shall include:

a. crude oil;

b. natural gas, not including natural gas such as LPG that is ready to be immediately consumed by the public;

c. geothermal energy;

d. asbestos, slate, semiprecious stones, limestone, pumice, precious stones, bentonite, dolomite, feldspar, halite, graphite, granite/andesite, gypsum, calcite, kaolin, leucite, magnesite, mica, marble, nitrate, obsidian, ochre, sand and gravel, quartz sand, perlite, phosphate, talc, fuller’s earth, diatomaceous earth, clay, alum, trass, jarosite, zeolite, basalt, and trachyte;

e. coal not yet processed into coal briquettes;

f. iron ore, tin ore, gold ore, copper ore, nickel ore, silver ore, and bauxite ore.

Letter b

The meaning of basic commodities vital to the general public shall include:

a. polished rice;

b. unhusked rice;

c. corn;

d. sago;

e. soybeans;

f. salt, whether iodized or non-iodized salt;

g. meat, that is, fresh meat that has not been processed into a processed product but including meat that has been slaughtered, skinned, cut, cooled, frozen, packaged or not, salted, treated with lime, marinated, preserved in other ways, and/or boiled;

h. eggs, that is, eggs that have not been processed, including eggs that have been cleaned, salted, or packaged;

i. milk, that is, expressed milk, including milk that has undergone a process of cooling or heating, does not include the addition sugar or other materials, and/or packaged or not packaged;

j. fruit, that is, fresh fruits that have been picked, which may have been washed, sorted, peeled, cut, sliced, graded, and/or packaged or not packaged; and

k. vegetables, that is, fresh vegetables that have been picked, washed, rinsed, and/or stored at low temperature, including minced fresh vegetables.

Letter cThe intention of this provision is to avoid double taxation because they are already objects of Local Tax.

Letter dSelf-explanatory


Medical health care services shall include:

1. services of general practitioner doctors, specialist doctors, and dentists;

2. services of veterinarians;

3. services of other expert health practitioners such as acupuncturists, dental technicians, nutritionists, and physiotherapists;

4. obstetric or midwife services;

5. paramedical and nursing services;

6. services of hospitals, maternity hospitals, medical clinics, medical laboratories, and sanatoria;

7. services of psychologists and psychiatrists; and

8. alternative medical treatment services, including those performed by paranormals.

Letter b

Social welfare services shall include:

1. services of orphanages and old age homes;

2. fire-fighting services;

3. accident assistance services;

4. services of rehabilitation institutions;

5. services of providing houses of mourning or burial services, including crematoria; and

6. services in the sports and exercise, except those of a commercial nature.

Letter c

Postal services using stamps shall include the services of delivering letters using adhesive postage stamps or using other means in place of postage stamps.

Letter dFinancial services shall include:

1. services of collecting funds from the public in the form of demand deposit, time deposit, deposit certificate, savings, and/or other equivalent forms;

2. services of placing funds, borrowing funds, or lending funds to other parties using documents, telecommunication facilities, or using sight drafts, checks, or other facilities;

3. financing services, including financing based on sharia principles, in the form of:

a. capital leasing;

b. factoring;

c. credit card businesses; and/or

d. consumer financing;

4. loan disbursement services based on the law of collateral, including sharia pawn services and fiduciary services; and

5. underwriting services.

Letter e

The meaning of “insurance services” shall be insurance coverage services including loss insurance, life insurance, and reinsurance, performed by insurance

companies to holders of insurance policies, not including insurance support services such as insurance agents, insurance claims adjusters, and insurance consultants.

Letter f

Religious services shall include:

1. services of houses of worship;

2. services of providing sermons or proselytism

3. services of conducting religious activities; and

4. other services in the religious sector.

Letter g

Educational services shall include:

1. services of operating school education, such as services operating general education, vocational education, special education, official service education, religious education, academic education, and professional education; and

2. services of providing non-school education.

Letter h

Artistic and entertainment services shall include all types of services performed by artistic or entertainment workers.

Letter i

Non-commercial broadcasting services shall include services of radio or television broadcasting performed by a government or private agency that do not constitute advertising and are not financed by a sponsor for commercial purposes.

Letter j

Self-explanatory.

Letter k

Employment services shall include:

1. employment services;

2. labor supply services as long as the labor supply enterprise is not responsible for the output of the work from the workforce concerned; and

3. services of providing workforce training.

Letter l

Hotel services shall include:

1. services of renting rooms, including ancillary services at hotels, inns, motels, lodgings, hostels, and facilities related to hotel services for staying guests; and

2. services of renting spaces for events or meetings at hotels, inns, motels, lodgings, and hostels.

Letter m

The services provided by governments in the context of conducting governmental affairs generally include the types of services executed by government agencies, including issuance of Building Permits, issuance of Trading Business Permits, issuance of Taxpayer Registration Numbers, and production of Resident Identity Cards.

Letter n

The meaning of “services of providing parking places” is services of providing places for parking that are conducted by the owner of the parking places and/or an entrepreneur to the users of the parking places, with payment collected.

Letter o

The meaning of “public telephone services using coins” is public telephone services using coins or tokens, operated by the government or the private sector.

Letter p

Self-explanatory.

Letter q

Self-explanatory.

Number 6Article 5

Paragraph (1)The delivery of Taxable Goods categorized as luxurious by a producer or the import of Taxable Goods that are categorized as luxurious, in addition to being subject to Value Added Tax, shall also be subject to Luxury Sales Tax, based on the considerations that:a. a balance is needed in the imposition of tax on low

income consumers and high-income consumers;

b. control is needed over the pattern of the consumption of Luxury Taxable Goods;

c. it is necessary to protect small-scale and traditional producers;

d. it is necessary to safeguard state revenues,

The meaning of Luxury Taxable Goods shall be:

1. goods that are not basic commodities; or

2. goods consumed by certain elements of the community;

3. goods generally consumed by high income elements of the community; and/or

4. goods consumed to indicate status.

Luxury Sales Tax on the import of Luxury Taxable Goods shall be imposed irrespective of who imports the Taxable Goods and irrespective of whether the import is carried out continuously or only once.

In addition, Luxury Sales Tax on the delivery of Luxury Taxable Goods shall be imposed irrespective of whether any part of said Taxable Goods has already been subject to Luxury Sales Tax at the time of a previous transaction.

Included in the definition of production under this paragraph are the activities of:

a. assembly: combining knocked down parts of a certain item to become semi-finished goods or finished goods, such as assembling cars, electronic goods, home appliances and so forth;

b. cooking: processing goods by means of heating, whether or not these are mixed with other ingredients;

c. mixing: combining two or more elements (substances) to produce one or more other item(s);

d. packaging: placing a certain item into an object that protects the good from damage and/or aids its marketing;

e. bottling: putting drinks or liquids into bottles that are sealed in certain ways;

and other equivalent activities, or asking other individuals or entities to undertake said activities.

Paragraph (2)The general definition of Input Tax shall only be effective for Value Added Tax and shall be unknown for Luxury Sales Tax. Therefore, Luxury Sales Tax already paid shall not be creditable against the Luxury Sales Tax payable.

Therefore, the principle of its collection shall be effective only once, namely at the time of:

a. a delivery by a manufacturer or producer of Luxury Taxable Goods; or

b. an import of Luxury Taxable Goods.

A delivery at a subsequent stage shall no longer be subject to Luxury Sales Tax.

Number 7Article 5A

Paragraph (1)In the event that Taxable Goods that have been delivered are returned by the buyer, the Value Added Tax and Luxury Sales Tax that is returned shall reduce the amount of the Output Tax

and Luxury Sales Tax owed by the seller/ Taxable Entrepreneur and shall reduce:

a. the Input Tax of the Taxable Entrepreneur/ buyer, in the case that the Input tax on the Taxable Goods that are returned has been credited;

b. the expense or assets of the Taxable Entrepreneur/ buyer, in the case that the tax on the Taxable Goods that are returned has not been credited and has been charged as expense or capitalized in the acquisition cost of assets; or

c. the expense or assets of a buyer that is not a Taxable Entrepreneur, in the case that the tax on the Taxable Goods that are returned has been charged as expense or capitalized in the acquisition cost of the assets.

Paragraph (2)

The meaning of “Taxable Services that are canceled” is the cancellation of all or part of the rights or facilities or amenities by the recipient of the Taxable Services.

In the case that Taxable Services that are delivered are canceled, whether in part or in whole by the recipient of Taxable Services, the Value Added Tax of the Taxable Services that are cancelled shall reduce the Output Tax owed by the Taxable Entrepreneur/ provider of Taxable Services and shall reduce:

a. the Input Tax of the Taxable Entrepreneur/ recipient of Taxable Services, in the case that the Input tax on the Taxable Services that are canceled has been credited;

b. the expense or assets of the Taxable Entrepreneur/ recipient of Taxable Services, in the case that the tax on the Taxable Services that are canceled has not been credited and has been charged as expense or capitalized in the acquisition cost of assets; or

c. the expense or assets of a buyer that is not a Taxable Entrepreneur, in the case that the tax on the Taxable Services that are canceled has been charged as expense or capitalized in the acquisition cost of the assets.

Paragraph (3)

Self-explanatory.

Number 8Article 7

Paragraph (1)

Self-explanatory.

Paragraph (2)

Value Added Tax is a tax that is imposed on the consumption of Taxable Goods within the Customs Zone. Therefore,

a. Tangible Taxable Goods that are exported;

b. Intangible Taxable Goods from within the Customs Zone that are used outside the Customs Zone; or

c. Taxable Services that are exported, including Taxable Services that are delivered by a Taxable Entrepreneur that produces and exports Taxable Goods based on order or request using material from and on the instructions of an orderer from outside the Customs Zone,

shall be subject to Value Added Tax at a rate of 0% (zero percent).

The imposition of the 0% (zero percent) rate does not mean exemption from imposition of Value Added Tax. Therefore, the Input Tax that has been paid for the acquisition of Taxable Goods and/or Taxable Services in connection with these activities may be credited.

Paragraph (3)

Based on considerations of economic developments and/or increased demand for funds for development, the Government is granted the authority to change the Value Added Tax tariff to no lower than 5% (five percent) and no higher than 15% (fifteen percent), still using the single-rate principle. Tariff changes as mentioned in this paragraph shall be presented by the Government to the House of Representatives in the context of discussion and drafting of the Draft State Budget.

Number 9

Paragraph (1)The Luxury Sales Tax tariff may be stipulated in several tariff brackets, namely the lowest tariff shall be 10% (ten percent) and the highest tariff shall be 200% (two hundred percent). The differences between said tariff brackets shall be based on the classifications of Luxury Taxable Goods whose delivery is subject to Luxury Sales Tax as intended under Article 5 paragraph (1).

Paragraph (2)Luxury Sales Tax is a tax that is imposed on the consumption of Luxury Taxable Goods within the Customs Zone. Therefore, Luxury Taxable Goods exported or consumed outside the Customs Zone shall be subject to Luxury Sales Tax at a tariff of 0% (zero percent). Luxury Sales Tax already paid on the acquisition of such exported Luxury Taxable Goods may be claimed back.

Paragraph (3)

With reference to the considerations stated in the elucidation to Article 5 paragraph (1), the classifications of goods subject to Luxury Sales Tax shall be based primarily on the capacity of the segment of society that uses said goods, in addition to being based on its utilitarian value to the public in general.Accordingly, a high tariff shall be imposed on goods consumed only by high income segments of society. If goods that are widely consumed in society need to be subject to Luxury Sales Tax, a low tariff shall be applied. The classification of goods that are subject to Luxury Sales Tax shall be done after consulting with the body of the House of Representatives that deals with finances.


Number 10Article 8A

Paragraph (1)

This paragraph stipulates the method for calculating Value Added Tax that is payable. For the sake of clarity, the following sample calculations are provided.

Examples:

a. Taxable Entrepreneur A sells for cash Taxable Goods with a Selling Price of Rp 25,000,000.

Value Added Tax payable = 10% x Rp 25,000,000 = Rp 2,500,000

The Value Added Tax of Rp 2,500,000 constitutes Output Tax that is collected by Taxable Entrepreneur A.

b. Taxable Entrepreneur B renders Taxable Services and receives a Service Fee of Rp 20,000,000.

Value Added Tax payable = 10% x Rp 20,000,000 = Rp 2,000,000

The Value Added Tax of Rp 2,000,000 constitutes Output Tax that is collected by Taxable Entrepreneur B.

c. A person imports Taxable Goods from outside the Customs Zone with an Import Value of Rp 15,000,000.

Value Added Tax collected through the Director General of Customs and Excise = 10% x Rp 15,000,000 = Rp 1,500,000

d. Taxable Entrepreneur D exports Taxable Goods with an Export Value of Rp 10,000,000.

Value Added Tax payable = 0% x Rp 10,000,000 = Rp 0

This Value Added Tax of Rp 0 constitutes Output Tax.

Paragraph (2)

A Tax Assessment Base in the form of another value shall be stipulated through or on the basis of a Minister of Finance Regulation only to ensure a sense of justice in the following cases:

a. it is difficult to determine the Selling Price, Service Fee Value, Import Value, or Export Value; and/or

b. the delivery of Taxable Goods is needed by the public at large, such as drinking water and electricity.

Number 11Article 9

Paragraph (1)

Self-explanatory.

Paragraph (2)

A buyer of Taxable Goods, recipient of Taxable Services, importer of Taxable Goods, party that uses Intangible Taxable Goods from outside the Customs Zone, or party that uses Taxable Services from outside the Customs Zone must pay Value Added Tax and is entitled to receive tax collection evidence. The Value Added Tax that should have been paid constitutes Input Tax for a buyer of Taxable Goods, recipient of Taxable Services, importer of Taxable Goods, party that uses Intangible Taxable Goods from outside the Customs Zone, or party that uses Taxable Services from outside the Customs Zone with status as a Taxable Entrepreneur.

The Input Tax that must be paid by the Taxable Entrepreneur may be credited against the Output Tax collected by the Taxable Entrepreneur in the same Tax Period.

Paragraph (2a)Basically, Input Tax shall be credited against Output Tax in the same Tax Period. However, for a Taxable Entrepreneur that has not yet commenced production, the Input Tax on acquisition and/or import of capital goods shall be allowed to be credited as mentioned in Article 9 paragraph (2), except for Input Tax as mentioned in Article 9 paragraph (8).

Paragraph (2b)

For the purposes of crediting Input Tax, a Taxable Entrepreneur shall use a Tax Invoice that fulfils the requirements as mentioned in Article 13 paragraph (5).

In addition, the Input Tax that is to be credited must also fulfill the requirements of formal and material correctness as mentioned in Article 13 paragraph (9).

Paragraph (3)

Self-explanatory.

Paragraph (4)

The Input Tax as intended under this paragraph shall be the creditable Input Tax.

It is possible that, in any one Tax Period, the creditable Input Tax may be greater than the Output Tax. This overpaid Input Tax may be claimed back or set off in the following Tax Period.

Example:

May 2010 Tax Period:

Output Tax = Rp 2,000,000Creditable Input Tax = Rp 4,500,000 -Tax overpaid = Rp 2,500,000

The overpaid tax may be claimed back or set off in the June 2010 Tax Period.

June 2010 Tax Period:Output Tax = Rp 3,000,000Creditable Input Tax = Rp 2,000,000 -Tax underpaid = Rp 1,000,000Tax overpaid from the May 2010 Tax Period carried over toJune 2010 Tax Period = Rp 2,500,000 -Tax overpaid in June 2010 = Rp 1,500,000

This overpaid tax may be carried over to the July 2010 Tax Period.

Paragraph (4a)

The overpaid Input Tax from a certain Tax Period in accordance with the provisions in paragraph (4) shall be carried over to the next Tax Period. However, if overpayment of Input Tax occurs at the end of a fiscal year, a refund of the overpaid Input Tax may be requested.

The definition of end of a fiscal year as intended in this provision includes the time when a Taxpayer winds up its business (is dissolved).

Paragraph (4b)

Self-explanatory.

Paragraph (4c)

Self-explanatory.

Paragraph (4d)

Self-explanatory.

Paragraph (4e)

To reduce misuse of the granting of the facility of accelerated restitution of overpaid tax, the Director General of Taxation may conduct audits after granting preliminary restitution of overpaid tax.

Paragraph (4f)

In the event that, after conducting an audit, the Director General of Taxation issues an Underpaid Tax Assessment Notice, a penalty surcharge as mentioned in Article 17C paragraph (5) of Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments shall not be applied, even if in the previous stage an Order Letter for Preliminary Restitution of Overpaid Tax has been issued. Instead, the administrative penalty that is imposed shall be interest of 2% (two percent) per month for a maximum of 24 (twenty-four) months as mentioned in Article 13 paragraph (2) of Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments

If the audit finds indications of criminal acts in the tax sector, this provision shall not apply.

Paragraph (5)

The meaning of “delivery on which tax is payable” shall be a delivery of goods or services which in accordance with the provisions in this Law shall be subject to Value Added Tax.

The meaning of “delivery on which tax is not payable” shall be a delivery of goods or services which is not subject to Value Added Tax as intended under Article 4A or which is exempt from Value Added Tax as intended under Article 16B.

A Taxable Entrepreneur which, in any Tax Period, makes a delivery on which tax is payable and a delivery on which tax is not payable may only credit the Input Tax related to the delivery on which tax is payable. It must be possible to ascertain from the Taxable Entrepreneur's accounts the part of the delivery on which tax is payable.

Example:

A Taxable Entrepreneur makes several types of delivery, namely:

a. deliveries on whichtax is payable = Rp 25,000,000Output Tax = Rp 2,500,000

b. deliveries on which VAT is not payable = Rp 5,000,000Output Tax = zero

c. deliveries exemptfrom VAT = Rp 5,000,000Output Tax = zero

Input Tax paid on the acquisition of:

a. Taxable Goods and Taxable Services related to deliveries on which tax is payable = Rp 1,500,000

b. Taxable Goods and Taxable Services related to deliveries on which VAT is not payable = Rp 300,000

c. Taxable Goods and Taxable Services related to deliveries exempt from VAT = Rp 500,000

According to this provision, the Input Tax creditable against the Output Tax of Rp 2,500,000 shall be only Rp 1,500,000.

Paragraph (6)

If it is not possible to ascertain exactly the Input Tax on deliveries on which tax is payable, the crediting of the Input Tax shall be calculated using guidelines stipulated through a Regulation of the Minister of Finance, which is intended to facilitate and provide assurance for the Taxable Entrepreneur.

Example:

A Taxable Entrepreneur makes two types of delivery, namely:a. deliveries on which tax is payable = Rp 35,000,000

Output Tax = Rp 3,500,000

b. deliveries on which tax is not payable = Rp 15,000,000Output Tax = zero

The Input Tax paid for acquisition of Taxable Goods and/or Taxable Services related to all deliveries comes to Rp 2,500,000, while the Input Tax related to deliveries on which tax is payable cannot be ascertained exactly. According to this provision, the Input Tax of Rp 2,500,000 shall not be fully creditable against the Output Tax of Rp 3,500,000. The amount of the creditable Input Tax shall be calculated based on the guidelines stipulated in a Regulation of the Minister of Finance.

Paragraph (6a)

In order to be creditable, the Input Tax on expenditures in the context of import and/or acquisition of capital goods must also fulfill the requirement that the expenditure must be related to the existence of deliveries on which Value Added Tax is payable.

In the event that a Taxable Entrepreneur experiences failure to start production, there is no delivery on which tax is payable and therefore no creditable Output Tax. Therefore, as a consequence, the Input Tax on import and/or acquisition of capital goods that has previously been restituted must be paid back.

Paragraph (6b)

Self-explanatory.

Paragraph (7)In order to simplify the calculation of the Value Added Tax that must be deposited, a Taxable Entrepreneur whose turnover in one (1) year does not exceed a certain amount may calculate the amount of its creditable Input Tax using the guidelines for calculation of Input Tax crediting.

Paragraph (7a)

In order to provide convenience in calculating the Value Added Tax that must be deposited, a Taxable Entrepreneur that engages in certain business activities may calculate the amount of its creditable Input Tax using the guidelines for calculation of Input Tax crediting.

Paragraph (7b)

Self-explanatory.

Paragraph (8)Basically, the Input Tax shall be creditable against the Output Tax, but the Input Tax on the expenditures as intended under this paragraph shall not be creditable.

Letter aThis provision provides legal certainty that the Input Tax acquired before an entrepreneur is confirmed as a Taxable Entrepreneur shall not be creditable.

Example:Entrepreneur A reports its business in order to be confirmed as a Taxable Entrepreneur on 19 April 2010. The confirmation as Taxable Entrepreneur is granted on 20 April 2010 and is retroactively effective as of 19 April 2010. The Input Tax acquired before 19 April 2010 shall not be creditable pursuant to this provision.

Letter bThe meaning of expenditure directly related to business activities shall be expenditures for production, distribution, marketing and management. This provision is applicable for all business sectors. In order to be creditable, the Input Tax must also fulfill the

requirement that the expenditure is related to the existence of deliveries on which Value Added Tax is payable. Therefore, even if a certain expenditure meets the requirement of being directly related to business activities, there is still a possibility that this Input Tax is not creditable if the expenditure is not related to deliveries on which Value Added Tax was payable.

Letter cSelf-explanatory

Letter dThis provision provides legal certainty that the Input Tax acquired before an entrepreneur is confirmed as a Taxable Entrepreneur shall not be creditable.

Example:Entrepreneur A reports its business in order to be confirmed as a Taxable Entrepreneur on 19 April 2010. The confirmation as Taxable Entrepreneur is granted on 20 April 2010 and is retroactively effective as of 19 April 2010. The Input Tax acquired before 19 April 2010 shall not be creditable pursuant to this provision.

Letter eSelf-explanatory

Letter fSelf-explanatory

Letter gSelf-explanatory

Letter hIn certain circumstances it may happen that a Taxable Entrepreneur only pays the Value Added Tax payable on the acquisition or use of Taxable Goods or Taxable Services after the tax assessment is issued. The Value Added Tax paid on the basis of said tax assessment shall not constitute creditable Input Tax.

Letter iIn accordance with the self-assessment system, a Taxable Entrepreneur must report all its business activities in Periodic Value Added Tax Returns. In addition, the Taxable Entrepreneur is also given the opportunity to correct Periodic Value Added Tax Returns, with the result that it is reasonable that any Input Tax not reported in the Periodic Value Added Tax Returns shall not be creditable.

Example:A Periodic Tax Return reports:

Output Tax = Rp 10,000,000Input Tax = Rp 8,000,000

An audit shows:Output Tax = Rp 15,000,000Input Tax = Rp 11,000,000

In this case, the creditable Input Tax is not Rp 11,000,000 but Rp 8,000,000, in accordance with the amounts reported in the Periodic Value Added Tax Return.

Therefore, the calculation resulting from the audit is:

Output Tax = Rp 15,000,000Input Tax = Rp 8,000,000 (-)

Underpaid tax according toresult of audit = Rp 7,000,000

Underpaid tax according toTax Return = Rp 2,000,000 (-)

Outstandingunderpaid tax = Rp 5,000,000

Letter j

Self-explanatory

Paragraph (9)This paragraph enables a Taxable Entrepreneur to credit Input Tax against the Output Tax in a different Tax Period, which is caused, among other matters, by the Tax Invoice being received late. Said crediting of Input Tax in a different Tax Period shall only be permitted in a following Tax Period no later than 3 (three) months after the end of the Tax Period concerned. If said period has elapsed, the crediting of Input Tax may be done by correcting the Periodic Value Added Tax Return concerned. Both these methods of crediting may only be done if the Input Tax has neither been charged as a cost nor added (capitalized) to the acquisition price of the Taxable Goods or Taxable Services concerned and the Taxable Entrepreneur has not been audited.

Example:Input Tax on the acquisition of Taxable Goods whose Tax Invoice is dated 7 July 2010 may be credited against the Output

Tax in the July 2010 Tax Period or in the following Tax Periods, no later than the October 2010 Tax Period.






Number 12Article 11

Paragraph (1)The collection of Value Added Tax and Luxury Sales Tax follows the accrual method, meaning that tax shall be payable at the time the Taxable Goods are delivered or the Taxable Services are rendered, even though the payment for said delivery has yet to be fully or partially received, or at the time the Taxable Goods are imported. The time at which tax shall be payable for transactions through electronic commerce shall comply with this paragraph.

Letter aSelf-explanatory

Letter bSelf-explanatory

Letter cSelf-explanatory

Letter dIf an individual or entity uses Intangible Taxable Goods from outside the Customs Zone within the Customs Zone or uses Taxable Services from outside the Customs Zone within the Customs Zone, the tax shall be payable at the time the individual or entity starts to use the Intangible Taxable Goods or Taxable Services within the Customs Zone. This matter is related to the fact that the party delivering the Intangible Taxable Goods or Taxable Services is outside the Customs Zone and therefore cannot be confirmed as a Taxable

Entrepreneur. Accordingly, the time at which tax is payable is no longer related to the time of delivery, but to the time of use.

Letter eSelf-explanatory

Letter fSelf-explanatory

Letter gSelf-explanatory

Letter hSelf-explanatory

Paragraph (2)

If payment is received prior to the delivery of the Taxable Goods as intended under Article 4 paragraph (1) letter a, prior to the delivery of Taxable Services as intended under Article 4 paragraph (1) letter c, prior to the commencement of the use of Intangible Taxable Goods from outside the Customs Zone as intended under Article 4 paragraph (1) letter d, or prior to the commencement of the use of Taxable Services from outside the Customs Zone as intended under Article 4 paragraph (1) letter e, the time at which the tax shall be payable shall be the time of payment.




Number 13Article 12

Paragraph (1)

An individual Taxable Entrepreneur shall pay tax at his/her place of residence and/or business location, while an entity Taxable Entrepreneur shall pay tax at its place of domicile and business location.

If a Taxable Entrepreneur has more than one business location other than his/her place of residence or its place of domicile, each of these places shall constitute a location at which tax is payable and the Taxable Entrepreneur must report its businesses in order to be confirmed as a Taxable Entrepreneur.

If a Taxable Entrepreneur has more than one location at which tax is payable located in the jurisdiction of one Office of the Directorate General of Taxation, the Taxable Entrepreneur shall choose one business location as the location at which tax is payable, which shall be responsible for all of these business locations at which tax is payable, except that if the Taxable Entrepreneur wishes to have more than one place where tax is payable, the Taxable Entrepreneur must notify the Director General of Taxation.

In certain circumstances, the Director General of Taxation may designate another place other than the residence, place of domicile or business location as the place where tax is payable.

Example 1:An individual A, who resides in Bogor, has a business in Cibinong. If no Taxable Goods and/or Taxable Services are delivered at individual A’s residence, individual A only needs to report its business to be confirmed as a Taxable Entrepreneur at the Cibinong Tax Service Office because the location at which tax is payable for individual A is at Cibinong. In contrast, if the delivery of Taxable Goods and/or the rendering of Taxable Services by individual A is carried out only at the residence, individual A only needs to register at the Bogor Tax Service Office. However, if individual A delivers Taxable Goods and/or Taxable Services both at his/her place of residence and at the business location, individual A must register at the Bogor Tax Service Office and the Cibinong Tax Service Office because the locations at which tax is payable are in Bogor and Cibinong.

Unlike individuals, entity Taxable Entrepreneurs must register themselves both in the place of domicile and in the business location because an entity Taxable Entrepreneur is deemed to make deliveries of Taxable Goods and/or Taxable Services in both these places.

Example 2:PT A has three business locations, located in Bengkulu, Bintuhan and Manna, all three of which are under the jurisdiction of the same tax service office, i.e. the Bengkulu Tax Service Office. These three business locations all deliver Taxable Goods and/or Taxable Services and each has sales and financial administration, with the result that PT A pays tax in these three places or cities. Accordingly, PT A must choose one of the business locations, for example the business location in Bengkulu, in order to report its business in order to be confirmed as a Taxable Entrepreneur. PT A’s business location in Bengkulu is responsible for reporting all business activities of the three branches of the company.

In the event that PT A wishes the business locations in Bengkulu and Bintuhan to be designated as places where tax is payable for all its business activities, PT A must notify the Head of the Bengkulu Tax Service Office.

Paragraph (2)If a Taxable Entrepreneur pays tax in more than one business location, said Taxable Entrepreneur in fulfilling its tax obligations may submit a written notification to the Director General of Taxation in order to choose one or more place(s) as the place at which tax is payable.


Paragraph (4)An individual or entity, whether a Taxable Entrepreneur or not a Taxable Entrepreneur, which uses Intangible Taxable Goods from outside the Customs Zone within the Customs Zone and/or uses Taxable Services from outside the Customs Zone within the Customs Zone shall still pay tax at the place of residence and/or business location of the individual or the place of domicile and/or business location of the entity.

Number 14Article 13

Paragraph (1)If Taxable Goods and/or Taxable Services are delivered, the Taxable Entrepreneur delivering the Taxable Goods and/or rendering the Taxable Services must collect the Value Added Tax payable and give a Tax Invoice as proof of tax collection. The Tax Invoice need not be made specially or differently from the bill of sale. The Tax Invoice may be in the form of a bill of sale or a specific document designated as a Tax Invoice by the Director General of Taxation.

Pursuant to this provision, for every delivery of Taxable Goods in the form of assets that are not originally intended to be traded as mentioned in Article 16D, a Tax Invoice must be issued.

Paragraph (1a)In principle, a Tax Invoice must be made at the time of delivery or at the time of receipt of payment in the case that payment was made before delivery. In certain circumstances, it is possible that the time of producing the Tax Invoice may not be the same as those times, for example in the cases of delivery of Taxable Goods and/or rendering of Taxable Services to a government treasurer. Therefore, the Minister of Finance shall have the authority to stipulate other times as times for producing Tax Invoices.

Paragraph (2)Notwithstanding the provisions as intended under paragraph (1), in order to relieve administrative burdens, a Taxable Entrepreneur shall be permitted to make one Tax Invoice covering all Taxable Goods delivered and/or Taxable Services rendered in one calendar month to the same buyer or same receiver of Taxable Services, called a Combined Tax Invoice.

Paragraph (2a)

In order to relieve administrative burdens, a Taxable Entrepreneur shall be permitted to make a Combined Tax Invoice no later than the end of the month of delivery of the Taxable Goods and/or rendering of Taxable Services even if partial or full payment has already been made during the month of delivery.

Example 1:

In the case that Taxable Entrepreneur A makes deliveries of Taxable Goods to entrepreneur B on 1, 5, 10, 11, 12, 20, 25, 28 and 31 July 2010, but as of 31 July 2010 there has been no payment whatsoever for the deliveries, Taxable Entrepreneur A is allowed to produce one (1) combined Tax Invoice that covers all the deliveries made during July, no later than 31 July 2010.

Example 2:

Taxable Entrepreneur A makes deliveries of Taxable Goods to entrepreneur B on 2, 7, 9, 10, 12, 20, 26, 28, 29 and 30 September 2010. On 28 September 2010, there is a payment by entrepreneur B for the delivery on 2 September 2010. In the case that Taxable Entrepreneur A issues a combined Tax Invoice, the combined Tax Invoice is produced on 30 September 2010 and covers all deliveries made during September.

Example 3:

Taxable Entrepreneur A makes deliveries of Taxable Goods to entrepreneur B on 2, 7, 9, 10, 12, 20, 26, 28, 29 and 30 September 2010. On 28 September 2010, there is a payment by entrepreneur B for the delivery on 2 September 2010 and an advance payment for a delivery to be made in October 2010. In the case that Taxable Entrepreneur A issues a combined Tax Invoice, the combined Tax Invoice is produced on 30 September 2010 and covers all deliveries and the advance payment made during September.



Paragraph (5)The Tax Invoice shall constitute proof of tax collection and may be used as a means of crediting Input Tax. The Tax Invoice must be completed completely, clearly and accurately and be signed by a party appointed by the Taxable Entrepreneur to sign it. However, information regarding the Luxury Sales Tax shall only be completed if Luxury Sales Tax is payable on the delivery of Taxable Goods. A Tax Invoice not completed in accordance with the provisions in this paragraph may result in the Value Added Tax stated therein not being credited in accordance with the provisions in Article 9 paragraph (8) letter f.

Paragraph (6)Notwithstanding the provisions as intended under paragraph (5), the Director General of Taxation may designate the documents usually used in the business community as being equivalent in status to Tax Invoices.

This provision is necessary, among other reasons, because:

a. the bills of sale used by entrepreneurs, such as telephone payment receipts and airplane tickets, are familiar to the general public;

b. to prove the collection of tax, there must be a Tax Invoice, while the party that should make the Tax Invoice, namely the party delivering the Taxable Goods or Taxable Services, is outside the Customs Zone. For example, if Taxable Services from outside the Customs Zone are used, the Tax Deposit Statement may be stipulated as the Tax Invoice; and

c. there are certain documents that are used in the import or export of Tangible Taxable Goods

Paragraph (7)

Self-explanatory

Paragraph (8)

The Tax Invoices that shall be amended include Tax Invoices that are filled in incorrectly or contain errors in writing. Included in the definition of incorrect entries or errors in writing are adjustments to Selling Price due to reduction in the quantity or quality of Taxable Goods that reasonably occurs at the time of delivery.

Paragraph (9)

A Tax Invoice shall meet the formal requirements if it is filled in completely, clearly, and accurately in accordance with the requirements mentioned in paragraph (5) or requirements

stipulated in a Director General of Taxation Regulation as mentioned in paragraph (6).

Tax Invoices or certain documents whose status is considered equivalent to Tax Invoices shall fulfill the material requirements if they contain accurate information about the delivery of Taxable Goods and/or rendering of Taxable Services, export of Tangible Taxable Goods, export of Intangible Taxable Goods, export of Taxable Services, import of Taxable Goods or use within the Customs Zone of Taxable Services and use of Intangible Taxable Goods from outside the Customs Zone.

Thus, even if a Tax Invoice or certain other document whose status is considered equivalent to a Tax Invoice meets the formal requirements and its Value Added Tax has been paid, if the information entered in the Tax Invoice or other document whose status is considered equivalent to a Tax Invoice is not in accordance with the actual facts regarding the delivery of Taxable Goods and/or rendering of Taxable Services, export of Tangible Taxable Goods, export of Intangible Taxable Goods, export of Taxable Services, import of Taxable Goods or use within the Customs Zone of Taxable Services and use of Intangible Taxable Goods from outside the Customs Zone, then the Tax Invoice or other document whose status is considered equivalent to a Tax Invoice shall not met the material requirements.

Number 15Article 15A

In order to provide flexibility to Taxable Entrepreneurs to deposit their underpaid tax and file their Periodic Value Added Tax Returns, this Article specifically stipulates deadlines for payment and filing of Periodic Value Added Tax Returns that differ from those stipulated in Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments.

In the event of delay in payment of tax payable according to a Periodic Value Added Tax Return and/or delay in filing to a Periodic Value Added Tax Return in accordance with the provisions stipulated in this Article, the Taxable Entrepreneur shall still be subject to administrative penalties as stipulated in Law Number 6 of 1983 on General Provisions and Procedures for Taxation and its amendments.

Number 16Article 16B

Paragraph (1)One of the principles in the Tax Law that must be firmly upheld is the enforcement and application of equal treatment to all Taxpayers or to all tax cases which are essentially the same by closely complying with the provisions in the laws and regulations. Accordingly, each tax facility, if actually

necessary, must refer to the above mentioned principles and care must be taken to ensure that its application does not deviate from the goals and objectives of granting said facility.

The goal and objective of granting facilities is basically to provide the tax facilities that are really necessary, especially in order to ensure that the economic sectors given high national priority succeed, boost the development of the business community and increase competitiveness, support national defense and facilitate national development.

The tax facilities set forth in this article are only granted:

a. to boost exports that constitute national priorities in Bonded Storage or to develop other regions within the Customs Zone especially established for said purpose;

b. to accommodate possible agreements with another country or other countries in the sectors of trade and investment, international conventions that have been ratified, and other customary international practices;

c. to promote better public health through the procurement of vaccines needed in respect of the national immunization program;

d. to assure the availability of the equipment of the Indonesian National Military/ Indonesian National Police Force (TNI/POLRI) which is adequate to protect the territory of the Republic of Indonesia from external and internal threats;

e. to ensure the availability of border data and aerial photographs of the territory of the Republic of Indonesia needed by TNI to support national defense;

f. to improve the nation's education and intelligence by helping the procurement of general text books, holy books and religious books at prices affordable to the public;

g. to promote the construction of places of worship;

h. to ensure the availability of housing affordable to low income communities, namely simple houses, very simple houses and simple flats;

i. to boost the development of the national fleet in the sectors of land, sea and air transport;

j. to encourage national development by helping the availability of strategic goods, such as raw material for silver handicrafts;

k. to ensure the execution of government projects financed by grants and/or foreign loans;

l. to accommodate customary international practice in the importation of certain Taxable Goods that are exempted from collection of Import Duty;

m. to assist the availability of Taxable Goods and/or Taxable Services that are needed for mitigation of natural disasters that are designated as national natural disasters;

n. to ensure the availability of clean water and electricity, which are urgently needed by the community; and/or

o. to ensure the availability of public transport in the air to encourage the smooth flow of goods and persons in certain regions where other suitable means of transport is not available, where the ratio between the volume of goods and persons that need to be moved to the available means of transportation is very high.

Paragraph (2)The special treatment in the form of the Value Added Tax payable not being collected means that the Input Tax related to the delivery of Taxable Goods and/or the rendering of Taxable Services which obtains said special treatment shall remain creditable, with the result that the Value Added Tax shall remain payable but it is not collected.

Example:Taxable Entrepreneur A produces Taxable Goods which obtain a facility from the State, namely that the Value Added Tax payable on the delivery of said Taxable Goods shall be permanently not collected (not merely deferred).

In order to produce said Taxable Goods, Taxable Entrepreneur A uses other Taxable Goods and/or Taxable Services as raw materials, auxiliary materials, capital goods or other cost components.

At the time said other Taxable Goods and/or Taxable Services are purchased, Taxable Entrepreneur A shall pay the Value Added Tax to the Taxable Entrepreneurs selling or delivering the Taxable Goods or Taxable Services.

If the Value Added Tax paid by Taxable Entrepreneur A to the supplying Taxable Entrepreneurs constitutes Input Tax creditable against the Output Tax, the Input Tax shall remain creditable against the Output Tax even though said Output Tax is zero because of the facility of the non-collection of the Value Added Tax by the State pursuant to the provisions as intended under paragraph (1).

Paragraph (3)

Unlike the provisions in paragraph {2), the special treatment in the form of exemption from Value Added Tax causes there to be no Output Tax, with the result that Input Tax related to the delivery of Taxable Goods and/or Taxable Services securing the exemption facility shall not be creditable.

Example:Taxable Entrepreneur B produces Taxable Goods securing a facility from the state, namely the exemption from Value Added Tax on the delivery of the goods.

In order to produce the Taxable Goods, Taxable Entrepreneur B uses other Taxable Goods or Taxable Services as raw materials, auxiliary materials, capital goods and other cost components.

At the time the Taxable Goods and/or Taxable Services are bought, Taxable Entrepreneur B pays Value Added Tax to the Taxable Entrepreneurs selling or delivering the Taxable Goods or Taxable Services.

Even though the Value Added Tax paid by Taxable Entrepreneur B to the supplier Taxable Entrepreneur constitutes creditable Input Tax, the Input Tax shall not be creditable because there is no Output Tax payable due to the granting of the facility of exemption from tax as intended under paragraph (1).

Number 17Article 16D

Deliveries of Taxable Goods including such things as machinery, structures, equipment, furniture, or other Taxable Goods that were not originally intended to be traded by a Taxable Entrepreneur shall be subject to tax.

However, Value Added Tax is not imposed on the transfer of Taxable Goods that are not directly connected with business activities and transfer of assets that were not originally intended to be traded, i.e. sedans and station wagons, the Input Tax on the acquisition of which assets, according to Article 9 paragraph (8) letter b and letter c, is not creditable.

and Procedures for Taxation and its amendments.

Number 18Article 16E

Paragraph (1)In order to attract individuals holding foreign passports to visit Indonesia, such individuals are given a tax incentive. The form of this incentive is the refund of Value Added Tax and Luxury Sales Tax that has been paid for the purchase of Taxable Goods in Indonesia that will then be taken out of the Customs Zone by such individuals.

Paragraph (2)

Taxable Goods that are purchased in the time period of one (1) month before an individual foreign passport holder leaves Indonesia are deemed to be intended to be consumed outside the Customs Zone. Therefore, the Tax Invoices that may be used as a basis for requesting refund of Value Added Tax and Luxury Sales Tax are limited to only those Tax Invoices issued within one (1) month before the individual foreign passport holder leaves Indonesia.

For an individual foreign passport holder who does not have a Taxpayer Registration Number, the Tax Invoices that may be used to request refund of Value Added Tax and Luxury Sales Tax must mention the individual’s identity in the form of name, passport number, and full address of the individual in the country that issued the passport.

Paragraph (3)

Self-explanatory.

Paragraph (4)

Self-explanatory.

Paragraph (5)

Self-explanatory.

Article 16 F

In line with the principle that the burden of tax payment for Value Added Tax on Goods and Services and Sales Tax on Luxury Goods lies with the buyer or consumer of the goods or recipient of the services, for this reason the buyer or consumer of goods or recipient of services should be jointly responsible for the payment of tax owed, if it happens that the tax payable cannot be collected from the seller or provider of services and the buyer or recipient of services cannot show evidence that it has paid the tax to the seller or provider of services.

ARTICLE IISelf-explanatory

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5069

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