Summary
Indonesia's standard VAT (PPN) rate increased from 11% to 12% effective January 1, 2025, under PP No. 1 Tahun 2025 implementing UU HPP Article 7. The rate applies to all taxable goods and services (BKP/JKP) unless a specific exemption or reduced rate applies. This guide explains who collects VAT, what is exempt, how to calculate output and input VAT, and how to file SPT Masa PPN.
What Is PPN (VAT)?
PPN (Pajak Pertambahan Nilai) is Indonesia's value-added tax, imposed on:
- BKP (Barang Kena Pajak): Taxable goods — most physical goods and intangible goods (software, digital content).
- JKP (Jasa Kena Pajak): Taxable services — most services including professional services, SaaS, advertising, and transportation.
VAT is collected at each stage of the supply chain. Registered businesses (PKP) collect Output VAT from customers and claim Input VAT on their purchases. The net amount (Output minus Input) is remitted to the state.
Key Regulations
- UU No. 42 Tahun 2009 (UU PPN) — Core VAT law; Articles 4-16 cover taxable events, rates, and exemptions.
- UU No. 7 Tahun 2021 (UU HPP) — Article 7: authorized the 12% rate; Article 9: updated input VAT rules.
- PP No. 1 Tahun 2025 — Sets PPN rate at 12% effective January 1, 2025.
- PMK No. 197/PMK.03/2013 — PKP registration threshold: IDR 4.8 billion annual taxable revenue.
- PMK No. 68/PMK.03/2022 — Special VAT rates for crypto assets (0.11%/0.22%).
- PMK No. 60/PMK.03/2022 — VAT on foreign digital economy services (PMSE) at 12%.
The 12% Rate: What Changed in 2025
| Period | Standard VAT Rate | Legal Basis |
|---|---|---|
| Until March 31, 2022 | 10% | UU PPN lama |
| April 1, 2022 - December 31, 2024 | 11% | UU HPP Art. 7(1) |
| January 1, 2025 onward | 12% | PP No. 1/2025 |
The 12% rate applies to all standard taxable transactions. Businesses that issued invoices with 11% after January 1, 2025 must issue corrective Tax Invoices (Faktur Pajak Pengganti).
Zero-Rated Supplies (0%)
Under UU PPN Article 7(2), exports of BKP and JKP to overseas are zero-rated. The exporter pays 0% output VAT but may still claim input VAT credits.
VAT-Exempt Goods and Services
Article 16B UU PPN and various PMKs exempt:
- Basic food staples (rice, corn, sago, soy, salt, fresh vegetables, fresh fruit, eggs, milk, fresh meat, fresh fish)
- Healthcare services (medical, dental, hospital)
- Educational services
- Financial services and insurance
- Government/public services
- Religious services
- Social welfare services
- Public transport (road, rail, water, air for passengers)
- Certain construction services for housing
Key distinction: Zero-rated (0%) = taxable but at 0%, input VAT still creditable. Exempt = outside the VAT system entirely, no Faktur Pajak issued, no input VAT credit.
PKP: Who Must Register
Mandatory PKP registration (Article 3A UU PPN): Any entrepreneur whose annual taxable revenue exceeds IDR 4.8 billion must register as PKP within 3 months of exceeding the threshold.
Voluntary PKP registration is allowed for businesses below IDR 4.8 billion. Useful if selling primarily to other PKP businesses that need Faktur Pajak for input credit.
Small entrepreneurs (below IDR 4.8 billion) who do not register as PKP:
- Cannot issue Faktur Pajak
- Cannot collect VAT from customers
- Cannot claim input VAT on purchases
Calculating VAT: Output and Input
Output VAT (VAT Charged to Customer)
Output VAT = 12% x DPP (Tax Base)
DPP is normally the transaction price. For specific transactions, DPP may differ:
- DPP Nilai Lain: Used for certain sectors (e.g., travel agents, tour operators use DPP = 10% of invoice value, effectively making real VAT = 1.2%).
- DPP for used goods dealers: DPP = margin only.
Input VAT (VAT Paid on Purchases)
PKP businesses claim input VAT on purchases of BKP/JKP used for their taxable business activities. Input VAT is credited against output VAT in the monthly SPT Masa PPN.
Example — retailer, September 2025:
| Item | Amount |
|---|---|
| Sales (excl. VAT) | IDR 200,000,000 |
| Output VAT (12%) | IDR 24,000,000 |
| Purchases from PKP supplier | IDR 120,000,000 |
| Input VAT paid | IDR 14,400,000 |
| VAT payable (Output - Input) | IDR 9,600,000 |
If Input VAT exceeds Output VAT, the taxpayer has a VAT overpayment (lebih bayar) which can be refunded or carried forward.
Faktur Pajak (Tax Invoice)
PKPs must issue a Faktur Pajak for every taxable sale. Since 2022, all Faktur Pajak are issued electronically via the e-Faktur system (DGT's online platform).
Key requirements:
- Must be issued at time of delivery, payment, or whichever is earlier
- Must contain: seller's NPWP, buyer's NPWP (if PKP), description of goods/services, DPP, VAT amount
- Late issuance penalty: 1% of DPP (KUP Article 14)
Faktur Pajak for Transactions with Non-PKP Buyers
When selling to non-PKP customers (retail consumers, non-registered businesses), a simplified Faktur Pajak may be used. The buyer's NPWP is not required.
Filing SPT Masa PPN (Monthly VAT Return)
PKPs file SPT Masa PPN monthly:
- Deadline: End of the following month (e.g., September VAT return due October 31)
- Filing: Via e-Faktur application or DJP Online
- Payment: By the end of the following month via e-Billing
Steps:
- Upload all Faktur Pajak (output and input) to e-Faktur
- System auto-populates SPT Masa PPN
- Review output VAT, input VAT credits, net payable
- Generate e-Billing payment code
- Pay via bank / ATM / mobile banking
- Submit SPT Masa PPN online
Annual VAT return: SPT Tahunan PPN is not required. Monthly SPT Masa PPN filings constitute the full VAT compliance cycle.
Digital Economy VAT (PMSE)
Under PMK 60/2022, foreign digital service providers (Netflix, Spotify, Adobe, Zoom, AWS, etc.) with Indonesian customers exceeding IDR 600 million annual revenue or 12,000 users must collect Indonesian VAT at 12% and remit to DGT. This is the "foreign PKP" designation.
Indonesian businesses purchasing digital services from foreign non-PKP providers must self-account for VAT (PPN Kegiatan Membangun Sendiri / reverse charge mechanism in certain contexts).
Real-World Example: Service Business
Digital marketing agency, PKP, October 2025:
| Transaction | DPP | VAT (12%) |
|---|---|---|
| Client A invoice (campaign management) | IDR 50,000,000 | IDR 6,000,000 |
| Client B invoice (SEO services) | IDR 30,000,000 | IDR 3,600,000 |
| Adobe CC subscription (input, if creditable) | IDR 2,000,000 | IDR 240,000 |
| Office supplies from PKP | IDR 5,000,000 | IDR 600,000 |
| Output VAT total | IDR 9,600,000 | |
| Input VAT total | IDR 840,000 | |
| Net VAT payable | IDR 8,760,000 |