Indonesia's VAT rate is legally 12%, but most businesses still charge an effective rate of 11%.
If you operate a company in Indonesia, you also need to know when VAT registration becomes mandatory, whether it makes sense to register voluntarily, and how VAT applies to your sales, purchases, imports, and exports.
This article explains how VAT works in Indonesia and what your company needs to do to stay compliant.
VAT Rates in Indonesia
Value added tax in Indonesia is known as PPN (Pajak Pertambahan Nilai).
Indonesia's statutory VAT rate increased to 12% on 1 January 2025. However, Ministry of Finance Regulation No. 131 of 2024 (PMK 131/2024) introduced a reduced tax base for most goods and services, keeping the effective VAT charged at 11%.
The calculation works like this:
12% × 11/12 of the selling price = 11% of the full selling price
If your company invoices an Indonesian client IDR 100 million for a taxable service, the VAT calculation is:
- Selling price: IDR 100,000,000
- VAT tax base: IDR 91,666,667, or 11/12 of the selling price
- VAT at 12%: IDR 11,000,000
So although the statutory rate is 12%, the client pays VAT equal to 11% of the transaction value.
| Transaction | VAT treatment |
|---|---|
| Most goods and services sold in Indonesia | Effective 11% |
| Luxury goods subject to PPnBM | 12% |
| Imports of most goods | Effective 11% |
| Exports of taxable goods | 0% |
| Qualifying exports of services | 0% |
The full 12% applies to qualifying luxury goods that are also subject to luxury goods sales tax (Pajak Penjualan atas Barang Mewah, or PPnBM).
For quick calculations, you can use our Indonesia PPN calculator.
What Is and Is Not Subject to VAT?
Most taxable goods and services supplied in Indonesia are subject to VAT, but not every transaction receives the same treatment.
The distinction matters because it also determines whether a business can recover the VAT it pays on its own expenses.
| Category | VAT charged | Can input VAT be credited? | Examples |
|---|---|---|---|
| Standard taxable supply | Effective 11% | Yes, where eligible | Most goods and services |
| Outside the VAT system | None | No | Restaurant food and drinks, certain hotel services, parking, arts and entertainment subject to regional taxes |
| VAT-exempt | None | No | Certain basic necessities, medical services, education, financial services and public transport |
| VAT not collected | None | Yes, subject to the facility | Certain transactions receiving a specific VAT facility |
| Zero-rated | 0% | Yes | Exports of taxable goods and qualifying services |
Restaurant food and drinks, hotel services, parking services, catering, and certain arts and entertainment activities that are subject to regional taxes sit outside the VAT system under PMK 70/2022.
For businesses in hospitality, this distinction is important. A hotel room or restaurant meal may fall outside the VAT system, while other services supplied by the same business can still be subject to VAT depending on what is being provided.
Zero-rated supplies are also different from exempt supplies. A business exporting at 0% can still credit eligible VAT paid on its costs, while VAT incurred in connection with exempt supplies normally becomes a cost to the business.
Who Must Register for VAT in Indonesia?
Businesses registered for VAT are known as PKPs (Pengusaha Kena Pajak).
The IDR 4.8 billion threshold
A business must register as a PKP once its gross turnover exceeds IDR 4.8 billion within a financial year.
Under Ministry of Finance Regulation No. 164 of 2023 (PMK 164/2023), a business that crosses the threshold has until the end of that financial year to apply for PKP confirmation. Its mandatory VAT obligations then begin from the first tax period of the following financial year.
For example, assume your company's financial year runs from January to December and turnover passes IDR 4.8 billion in July 2026. You must apply for PKP confirmation by 31 December 2026 and start collecting and reporting VAT from January 2027.
This replaced the older rule that required businesses to apply by the end of the month following the month in which they crossed the threshold.
Voluntary VAT registration
Companies below the IDR 4.8 billion threshold can register voluntarily.
This often makes sense for companies selling primarily to larger Indonesian businesses. PKP customers can use valid tax invoices from their suppliers to credit eligible input VAT against their own VAT liability, so many B2B customers prefer dealing with PKP suppliers.
Registration also allows the company to credit eligible VAT incurred on expenses such as rent, equipment, professional services, local purchases, and imports. For exporters, voluntary registration can be particularly useful because qualifying sales can be zero-rated while the company continues to incur VAT on its Indonesian costs.
The trade-off is additional compliance. Once your company becomes a PKP, it must issue tax invoices and file VAT returns every month.
How to Register for VAT in Indonesia
PKP registration is handled through Indonesia's Coretax system.
Before applying, your company must already be established and registered as an Indonesian taxpayer. For a foreign-owned business, this will normally mean having a registered PT PMA and an Indonesian tax identification number, or NPWP.
PKP application
The application requires information about the company, its management, business activities, tax registration, and place of business. The exact supporting documents depend on the company's circumstances.
The Directorate General of Taxes can verify the company's business activity and place of business as part of the approval process. Companies using a virtual office can apply for PKP status, but additional requirements apply to the office arrangement and supporting documentation.
Indonesia does not issue a separate VAT number once the application is approved. The company continues using its existing NPWP, while its PKP confirmation establishes its status as a VAT-registered business.
If you are establishing a new foreign-owned company, see our guide to setting up a PT PMA in Indonesia.
VAT Obligations After Registration
Once your company becomes a PKP, VAT forms part of its monthly tax compliance.
Issuing tax invoices
A PKP issues electronic tax invoices for taxable transactions through Indonesia's tax administration system. These invoices record the VAT charged and allow eligible PKP customers to claim the amount as input VAT.
Input VAT and output VAT
The VAT your company charges customers is known as output VAT. Eligible VAT paid to suppliers or on imports is input VAT.
The amount due for the month is calculated as:
Output VAT – creditable input VAT = VAT payable
For example, if your company charges IDR 50 million of VAT during the month and has IDR 35 million of eligible input VAT, the VAT payable is IDR 15 million.
If input VAT exceeds output VAT, the excess can be carried forward. Refunds are also available in certain circumstances, including where a business consistently accumulates excess input VAT.
Monthly VAT returns
Every PKP must file a monthly VAT return (SPT Masa PPN), including for tax periods where no VAT is payable.
VAT payment and the monthly return are due by the end of the following month. For example, VAT for January is paid and reported by the end of February. A late monthly VAT return carries a fine of IDR 500,000.
For the complete filing calendar, see our guide to monthly and annual tax reporting in Indonesia.
VAT on Cross-Border Transactions
Cross-border transactions can receive very different VAT treatment depending on whether your company is importing or exporting goods or services.
Exporting goods
Exports of taxable goods from Indonesia are subject to 0% VAT.
Because this is a zero-rated supply rather than a VAT exemption, the exporter can still credit eligible input VAT incurred on Indonesian business expenses.
Exporting services
Certain services produced in Indonesia by a PKP and used outside Indonesia can also qualify for 0% VAT.
The current rules are set out in Ministry of Finance Regulation No. 81 of 2024 (PMK 81/2024). Qualifying categories include:
- Toll manufacturing, repair, and maintenance services
- Freight forwarding related to exported goods and certain international aircraft or ship leasing services
- Information technology, telecommunications, satellite, and connectivity services
- Research and development
- Consulting services, including business and management, legal, HR, marketing, architecture and interior design, engineering, accounting, bookkeeping, audit, and tax
- Construction consulting for buildings or planned buildings outside Indonesia
- Trade services that source Indonesian sellers or suppliers for goods intended for export
The trade-services category is particularly relevant for foreign companies operating sourcing functions in Indonesia. A local company that identifies Indonesian suppliers for an overseas buyer can fall within the exported-services framework where the regulatory conditions are met.
A service does not qualify for 0% simply because the customer is overseas. There must be a written agreement with the foreign customer that clearly states the type of service, the activities performed in Indonesia for use outside Indonesia, and the value of the transaction. The Indonesian supplier must also receive payment from the foreign customer and retain valid proof of that payment.
If those conditions are not met, the service is treated as a domestic taxable supply.
Where the service is actually used also matters. An architecture firm in Bali preparing drawings for an Australian company building a villa in Bali is providing a service that is used in Indonesia, so the transaction is subject to Indonesian VAT.
If the same firm prepares drawings for a French developer constructing a building in Paris, the service can qualify for 0% VAT if the applicable export conditions are met.
Services that are both produced and used outside Indonesia sit outside Indonesian VAT rather than being treated as zero-rated exports.
Importing goods
VAT is collected when taxable goods enter Indonesia. For most imported goods, the current effective VAT burden is 11%, alongside any applicable import duty and PPh Article 22 income tax prepayment.
If the importer is a PKP, eligible import VAT can be credited against its output VAT.
For more detail on bringing products into the country, see our guide to import licensing in Indonesia. You can also read our article on calculating customs duty and import tax in Indonesia.
Services purchased from overseas
Indonesian VAT can also apply when an Indonesian company uses services supplied from abroad. This can include overseas consulting, software, management services, licensing arrangements, or services provided by a foreign parent company.
Where the foreign provider or another appointed party does not collect Indonesian VAT, the Indonesian customer may need to self-assess the tax. A PKP can credit eligible VAT paid on those services as input VAT.
Cross-border service payments can also create withholding-tax obligations separate from VAT. See our guide to withholding tax in Indonesia for the applicable PPh rules.
Foreign digital-service providers appointed as Indonesian VAT collectors follow a different process and charge Indonesian VAT directly to their Indonesian customers.
VAT Registration and Compliance with Emerhub
Emerhub's accounting and tax team in Indonesia can handle your PKP registration and ongoing VAT compliance, including tax invoices, VAT calculations, payments, and monthly returns.
If your company has not yet reached the mandatory registration threshold, we can also help determine whether voluntary PKP registration makes sense based on your customers, expenses, and business model.
Talk to our Indonesia team about your VAT and accounting requirements.
Frequently asked questions
Is VAT in Indonesia 11% or 12%?
Indonesia's statutory VAT rate is 12%. However, PMK 131/2024 applies the 12% rate to a tax base equal to 11/12 of the transaction value for most goods and services, producing an effective VAT charge of 11%. The full 12% rate applies to qualifying luxury goods subject to PPnBM.
When does a company have to register for VAT in Indonesia?
A business must register as a PKP once its gross turnover exceeds IDR 4.8 billion during a financial year. Under PMK 164/2023, the company must apply for PKP confirmation by the end of the financial year in which it crosses the threshold. It starts collecting, paying, and reporting VAT from the first tax period of the following financial year.
How often are VAT returns filed in Indonesia?
VAT returns are filed monthly. Every PKP must submit an SPT Masa PPN for each tax period, including months where no VAT is payable. The VAT payment and return are due by the end of the following month.
Can I claim back the VAT my company pays on purchases?
A PKP can credit eligible input VAT against the output VAT it charges customers. Input VAT connected to taxable and zero-rated activities can be credited, while VAT related to exempt supplies cannot.
Is VAT charged on imported goods?
Yes. Most taxable imported goods are currently subject to an effective VAT charge of 11%, collected as part of the customs process. A PKP importer can credit eligible import VAT against its VAT liability.