Introduction to the New VAT Decree

The Indonesian Directorate General of Taxes (DGT) has issued new guidelines to streamline VAT invoice issuance for taxable entrepreneurs in 2025. These updates, outlined in PER-1/PJ/2025, ensure legal certainty and improve invoicing efficiency. Businesses must adapt to these changes to maintain compliance and avoid potential penalties.

Key Changes in VAT Invoice Issuance

One of the major updates in this decree is the implementation of a 12% VAT rate for most goods and services. The regulation provides clear guidance on how taxable entrepreneurs (PKP) should issue invoices during the transition period to prevent discrepancies. To ensure seamless compliance, businesses must correctly state the tax base and the applicable rate.

Transition Period: January–March 2025

During the transition period from January 1 to March 31, 2025, VAT invoices must adhere to specific conditions. Taxable entrepreneurs can apply either:

1. 12% rate on a full tax base
2. 11% rate on a full tax base

Both formats are considered valid as long as they meet the necessary invoice requirements. This grace period is designed to help businesses adjust without disrupting operations.

VAT Application for Luxury Goods

The decree also introduces a special provision for luxury taxable goods. From January 1 to January 31, 2025, a transitional rule allows businesses to apply VAT at 12% on 11/12 of the selling price. However, starting February 1, 2025, the full 12% rate will apply to the total selling price. These provisions ensure smoother implementation while preventing price distortions in the market.

Exceptions for Specific Sectors

Certain industries are exempt from the transitional VAT invoicing rule. These include:

• Land and buildings
• Motor vehicles
• Luxury water and air transportation
• Firearms and ammunition

Businesses operating in these sectors must immediately apply the standard 12% VAT rate without transitional adjustments.

Ensuring Compliance and Efficiency

To fully comply with the new VAT regulations, businesses should:

• Review and update their invoicing systems
• Train financial and accounting teams on the updated requirements
• Utilize the electronic tax invoicing system (e-Faktur) to minimize errors

By proactively adjusting to these changes, businesses can optimize their financial operations while maintaining full compliance with tax laws.

Conclusion

The 2025 VAT decree introduces critical updates that impact taxable entrepreneurs across various industries. With a structured transition period, clear tax base guidelines, and sector-specific exemptions, businesses have a framework for seamless compliance. Staying informed and prepared will help ensure smooth operations and financial accuracy in the new tax landscape.