DGT Circular Letter No. SE-4/PJ/2020/ (SE-4)

Confirmation of VAT Treatment on Delivery of Certain Port Services to Marine Transport Companies that conduct Foreign Shipping Activities

Based on Government Regulation No. 74/2015, delivery of certain Port Services by a Port Business Entity to a marine transport company that conducts foreign shipping activities, the Director General of Tax (DGT) has issued DGT Circular No. SE-4/PJ/2020 (SE-4) to provide confirmation on this matter.

The certain Port Services that are covered include: 1) vessel services, i.e. anchorage services, pilot services, tug services, and mooring services; and 2) goods services, i.e. container unloading services from when the vessel arrives at the container yard and/or from when the goods leave the container yard to the vessel.

The exemption from imposition of Value Added Tax is granted as long as the vessel that is used fulfils the following provisions:

  1. is operated by a national shipping company or a foreign shipping company that performs foreign shipping activities; and
  2. does not transport passengers and/or cargo from one port to another port within Indonesian territory.

A vessel that is operated by a foreign shipping company must also fulfil the provision that the state where the foreign shipping company is domiciled grants the same treatment to Indonesian shipping vessels based on the principle of reciprocity.

In the case that the requirements are not fulfilled, the Value Added Tax that was exempted must be paid within no longer than one (1) month from the date when the requirements are not fulfilled.

In the event that the Value Added Tax that was exempted is not paid within the time period, the Director General of Tax may issue an Underpaid Tax Assessment Notice with the addition of penalties in accordance with the tax laws and regulations.

SE-4 also provides case examples that can serve as a reference for Taxpayers.

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