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VAT Indonesia Guide for Import/Export: How to Save on Taxes

Are you involved in the import or export of goods or services in Indonesia? Understanding the country’s tax laws is essential to save money and stay compliant. In this guide, we’ll take a closer look at Indonesia’s Value-Added Tax (VAT), Luxury-Goods Sales Tax (LGST), and Customs & Excise regulations.

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What is VAT?

Value-Added Tax (VAT) is a tax imposed on the transfer of taxable goods or the provision of taxable services in Indonesia. Here’s a breakdown of the events and services that are subject to VAT in Indonesia:

  1. Deliveries of taxable goods by an enterprise;
  2. Import of taxable goods;
  3. Deliveries of taxable services by an enterprise;
  4. Use or consumption of taxable intangible goods/services originating from abroad;
  5. Export of taxable goods (tangible and intangible) or services by a taxable enterprise.

The VAT rate in Indonesia for 2023 is 11 percent, but the exact rate may be increased or decreased to 15 percent or 5 percent according to government regulation. VAT on the export of taxable tangible and intangible goods as well as export of services is fixed at 0 percent. However, certain limitations for the zero-rated VAT apply to exports of services.

What is LGST and How Does it Affect Imports?

In addition to VAT, Indonesia also imposes a luxury-goods sales tax (LGST) on certain manufactured taxable goods. The goal of LGST is to create a more just society by taxing luxury items, such as luxury cars and motorcycles. Currently, LGST rates range from 10 – 125 percent, with the law allowing for a maximum rate of 200 percent.

How Does LGST Affect Exports?

If you’re exporting manufactured taxable goods, such as luxury cars or motorcycles, from Indonesia, LGST may affect your business. Since LGST applies to the deliveries or imports of certain taxable goods, it can make exporting these goods more expensive. However, it’s worth noting that LGST doesn’t apply to the export of raw materials, so you can still export these goods without incurring additional taxes.

Customs & Excise Regulations

Indonesian law allows import duties to range between 0 and 150 percent of the customs value of the imported goods, with the highest rate currently set at 40 percent. However, due to the country’s globalising economy, Indonesia has signed a number of free-trade agreements, effectively scrapping or significantly lowering import duty rates. Still, for protectionist strategies, the government may apply high rates for specific goods. Anti-dumping import duty rates may also apply to certain products from certain countries.

In conclusion, understanding Indonesia’s tax laws is crucial for anyone involved in importing or exporting goods or services. By keeping abreast of these regulations, you can avoid overpaying taxes, stay compliant, and make the most of your business opportunities in Indonesia.

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