Did you know that services provided in Indonesia but utilized outside Indonesia may be subject to a 0% VAT rate?
Under Minister of Finance Regulation No. 81 of 2024 (PMK 81/2024), the export of Taxable Services (JKP) refers to services provided within the Indonesian customs territory, while the results or benefits of those services are utilized outside the customs territory.
What Is the VAT Rate?
Under Article 278 of PMK 81/2024, the export of Taxable Services remains a VAT-able transaction. However, the applicable VAT rate is 0%.
This provision follows the destination principle, under which VAT is imposed in the country or place where goods or services are used or utilized.
What Types of Services Qualify for the 0% VAT Rate?
Based on Article 279 of PMK 81/2024, there are three groups of services whose exports may be subject to a 0% VAT rate:
1. Services related to movable goods
For example, contract manufacturing services (maklon).
2. Services related to immovable goods located outside the customs territory
For example, construction consulting services.
3. Other services utilized outside the customs territory
For example, research and development services.
However, Not All Exported Taxable Services Automatically Qualify for 0% VAT
Certain requirements must be fulfilled.
Under Article 282 of PMK 81/2024, the export of Taxable Services may be subject to a 0% VAT rate if:
- It is based on a written agreement or contract between the Taxable Entrepreneur (PKP) and the recipient of the exported services, specifying the type, details, and value of the services; and
- Payment has been made and is supported by valid proof of payment from the recipient of the exported services to the PKP.
If these requirements are not fulfilled, the transaction is treated as a domestic supply of Taxable Services and is subject to VAT.
What About the Administrative Requirements?
PKPs exporting Taxable Services also have certain administrative obligations.
First, prepare a Service Export Notification (Pemberitahuan Ekspor Jasa/PEJ).
The PEJ serves as the document for the export of Taxable Services and must be accompanied by an invoice.
Second, the PEJ must be prepared through Coretax.
The PEJ is reported in the VAT Periodic Tax Return (SPT Masa PPN) together with exports of Taxable Goods (BKP) and intangible Taxable Goods.
Third, Input VAT may still be credited.
VAT paid by the PKP on goods or services directly related to the export of Taxable Services may be credited as Input VAT, subject to the applicable tax regulations.
Key Takeaway
The export of Taxable Services does not mean the transaction is exempt from VAT. It remains a VAT-able transaction, but a 0% VAT rate may apply if the relevant service and requirements are fulfilled.
Therefore, PKPs providing services to overseas customers should ensure that the type of service, written agreement, proof of payment, and PEJ administration through Coretax comply with the applicable requirements. If you provide services to overseas customers and are unsure whether your transaction qualifies as an export of Taxable Services subject to 0% VAT, make sure the transaction and its tax administration are properly reviewed before filing your tax return.