Following the update of the effective VAT rate for non-luxury goods as stipulated by MoF Regulation No. 131 of 2024 (PMK-131) (please refer to our January 2025 Tax Info), the Minister of Finance has issued Regulation No. 11 of 2025 (PMK-11) to provide legal certainty for domestic taxpayers in certain business sectors.

In simple terms, this regulation confirms the equality of VAT treatment for the transactions that apply “Other Value” (VAT invoice code 04) and “Certain Value” (VAT invoice code 05) as the tax base, whereby although the applicable VAT rate became 12%, the effective tax base would be multiplied by 11/12 as well. Accordingly, there is no additional VAT burden for Non-Luxury Goods and Services due to the increase of the VAT rate. With the release of this regulation, several previous regulations that governed these matters have been amended and replaced.

Even though this regulation was issued and became effective on 4 February 2025, the provisions in this regulation have been in effect since 1 January 2025. It is important to note that the Taxpayers mentioned in this regulation who have issued incorrect tax invoices are encouraged to issue replacement VAT invoices to prevent future tax disputes.