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Since its first enactment in 1983, the Law on Value Added Tax and Sales Tax on Luxury Goods has continued to improve. One of the aspects that has undergone improvement is the value-added tax on non-saleable assets.
It is important to note that based on Article 9 of the VAT Law, taxable entrepreneurs can credit input tax on acquiring capital goods in the form of machinery, buildings, equipment, or equipment for activities. Based on the latest provisions, taxable entrepreneurs can credit input tax on acquiring such machinery and equipment even though they have not yet produced it commercially. It is necessary to have a philosophical understanding to explore the reasons behind the imposition of VAT regulation when capital goods are resold. Therefore, we will have a little flashback to the VAT provisions since the VAT law was issued through this article.
Law Number 8 of 1983 concerning VAT has not specifically regulated the VAT treatment of assets that, according to their original purpose, are not for sale. We can see this in Article 16 of the VAT Law, which, among others, stipulates that upon written request of the Taxable Entrepreneur, the overpayment of tax that has not been compensated shall be made within the period as regulated in the Law on General Provisions and Tax Procedures, or within another period stipulated by the Minister of Finance.
Furthermore, in the second amendment to the VAT Law in 1995 (Law No. 20 of 1994), the provisions referred to in Article 16 were deleted and replaced with four new provisions between Article 16 and Article 17. One of the new provisions born with the promulgation of Law No. 20 of 1994 is Article 16D. The provision, among others, stipulates that Value Added Tax is imposed on the transfer of assets by a Taxable Entrepreneur which, according to the original purpose of the assets, are not for sale, to the extent that the Value Added Tax paid at the time of acquisition can be credited.
In the explanation, among other things, it is stated that the sale of assets in the form of buildings, vehicles, equipment, machinery, and other equipment that, according to their original purpose, are not for sale has implications for the imposition of VAT to the extent that the input tax on the purchase of these assets is creditable under the VAT Law.
However, the provision also stipulates that if the input tax cannot be creditable due to administrative errors or negligence of the taxable entrepreneur, such as incomplete tax invoices, then VAT on the sale of assets not intended to be sold is still imposed.
However, the provisions in the 1994 amendment to the VAT Law do not further regulate the obligation to make tax invoices for the sale of these assets. Thus, confusion arises in the application of its provisions.
Therefore, after the first amendment of the VAT Law 1983, the government again refined the VAT provisions in Law 42 of 2009. In the regulation, among others, it is stipulated that value-added tax is imposed on the delivery of taxable goods in the form of assets that, according to their original purpose, are not for sale by the taxable entrepreneur, except for the delivery of assets whose input tax cannot be credited due to the acquisition of taxable goods or taxable services that have no direct relationship with business activities and the acquisition and maintenance of motor vehicles in the form of sedans and station wagons, unless they are merchandise or leased.
Thus, based on these provisions, VAT will only be imposed on the delivery of assets that, according to their original purpose, are not for sale if they meet the following requirements:
- The assets delivered are taxable goods;
- Assets are delivered by taxable entrepreneurs;
- Assets that, according to their original purpose, are not for sale, such as capital goods, supplies, and equipment;
- Input tax on the acquisition of the assets can be creditable according to the provisions of the tax law
- Assets are directly related to the taxable entrepreneur's business activities
- The asset is not a station wagon or sedan.
Upon the asset sale, the taxable entrepreneur must make a tax invoice and report it to the SPT Masa PPN.
There are several fiscal indicators for detecting the sale of taxpayer assets. Among other things, by comparing special attachment 1A of the Annual Corporate Income Tax Return for the current year with the previous year, if there is a decrease in the book value and the number of assets reported in the Annual Corporate Income Tax Return, this can be one of the triggers for the imposition of VAT 16D by the tax authorities. Therefore, taxpayers must be careful when reporting the Annual Corporate Income Tax Return.
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