For the purpose of increasing the export of services and competitiveness of the local service industry, the Minister of Finance (“MoF”) has expanded the types of Taxable Services whose exports are subject to Value Added Tax (“VAT”) by issuing MoF Regulation No. 32/PMK.010/2019 (“PMK 32”) regarding Limitation of Activities and Types of Taxable Services whose Exports are Subject to Value Added Tax. PMK 32 became effective from 29 March 2019.

An export of taxable services is defined as service activities within Indonesian customs territory that cause goods, facilities, or rights to be available to be utilized outside the Indonesian customs territory. The types of Taxable Services whose export is subject to VAT are as follows:

1) Service activities that are attached to exported movable goods:

  1. Toll manufacturing services (see Article 5 paragraph 1 of PMK 32);
  2. Repair and maintenance services; and
  3. Freight forwarding related to export goods.

2) Service activities that are attached to immovable property located outside the Indonesian customs territory which are construction consulting services including the assessment, planning, and design of construction related to buildings or plans of buildings that are located outside the Indonesian Customs territory.

3) Service activities whose results are provided for use outside of the Indonesian Customs territory:

  1. Technology and information services (see Article 5 paragraph 2 of PMK 32);
  2. Research and development services;
  3. Rental of aircraft and vessels for international aviation and shipping;
  4. Consulting services, including:
    •  Business and management services;
    • Legal services;
    • Architectural and interior design services;
    • Human resources services;
    • Engineering services;
    • Marketing services;
    • Accounting services;
    • Services of audit of financial statements; and
    • Tax services.
  5. Trading services in the form of services to find sellers of goods for export within the Indonesian customs territory.
  6. Interconnection services, satellite and / or communication / data connectivity services (see Article 5 paragraph 3 of PMK 32).

The VAT rate for export of Taxable Services is 0% (zero percent) provided that it meets the following conditions:

  1. Based on a written agreement between a domestic service provider (VAT Entrepreneur) and an overseas counterparty that stipulates the type, details of activities to be utilized outside the customs territory, and the value of the service.
  2. There is a payment from the overseas counterparty to the VAT Entrepreneur accompanied by a valid proof of payment.

In the event that these conditions are not fulfilled, the services shall be treated as delivery of Taxable Services within the Customs territory and subjected to the regular VAT rate of 10%.

The VAT on Export of Taxable Services is payable when the consideration for the exported service is recorded or recognized as receivable or income. Furthermore, the VAT Entrepreneur that carries out Export of Taxable Services is required to prepare a VAT invoice in the form of an Export Service Declaration Form accompanied by the relevant sales invoice. Specifically for toll manufacturing services, the entrepreneur is required to prepare the Export Service Declaration Form and the Export Declaration Form for the exported goods.

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