Income Tax Article 23 and VAT on Forwarding Services

Income Tax Article 23 and VAT on Forwarding Services

PPN - 25 Apr, 2024 13:04 WIB

The war in the Middle East continues to escalate. The parties are launching their attacks against each other. Some economists are concerned that the ongoing war in the Middle East will significantly impact the world economy. The Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the war in the Arabian Peninsula has caused global uncertainty and increased commodity prices (CNN Indonesia, 2024). The increase in commodity prices is partly due to cargo ships having to detour to avoid the Suez Canal, which impacts the increasing fuel prices and cargo costs.

 

In this article, we will not discuss the war that is raging but the taxation aspects of cargo companies, especially income tax and VAT.

 

In tax provision, freight forwarding is generally defined as a business activity aimed at representing the interests of the owner to take care of part or all of the activities necessary for the implementation of the delivery and receipt of goods by land, sea, and air transportation; which may include receiving, storage, sorting, packing, marking, measuring, weighing, managing document settlement, issuing transportation documents, calculating transportation costs, claims, insurance for shipping goods and settling bills and other costs related to the delivery of goods until the goods are received by the recipient.

 

From this definition, we can see that freight forwarding are different from shipping and flight services. Freight forwarding services focus on transportation management services for land, sea, and air transportation, while shipping and flight services focus on shipping goods and transportation through sea and air transportation.

 

The difference in the definition and scope of freight forwarding with shipping and flight services causes differences in taxes imposed. The tax provisions stipulate that income earned by companies engaged in the shipping industry, international flights, and foreign insurance companies is subject to Income Tax Article 15. The amount of Income Tax Article 15 imposed on shipping and flight companies is as follows: 

 

No

Type of Industry

Object of Income Tax Article 15

Income Tax Article 15 rate

1

Domestic flight charters

Fees received from domestic flight charters

1.8% of Gross Revenue

2

Domestic Shipping

Income derived from the transportation of persons or goods including the leasing of vessels either from Indonesia or from abroad for shipping business.

1.2% of Gross Revenue

3

Overseas Shipping and Flight       

Income received from the business of transporting people or goods from one port to another port in Indonesia or abroad.

2.64% of Gross Revenue

 

On the other hand, income from freight forwarding services is subject to Income Tax Article 23. This provision is in the Minister of Finance Regulation Number 141 of 2015 regarding other services subject to Income Tax Article 23. Furthermore, PMK 141 of 2015 also stipulates that compensation for freight forwarding services is deducted by Income Tax Article 23 at 2% of the gross. 

 

In addition to income tax, value-added tax is also payable on shipping, flight, and freight forwarding services. Minister of Finance Regulation No. 75 of 2010 concerning Other Value as the Basis for Tax Imposition, among others, regulates that the other value for the handover of package delivery services is 10% of the amount billed or the amount that should have been billed. Thus, the effective rate of VAT on freight forwarder services is 1.1% of the delivery value. However, it is notable that input tax related to freight forwarding services cannot be credited to the tax-paying entrepreneurs.

 

That's a brief overview of the difference between shipping and freight forwarding services. If you need further explanation, you can contact Ideatax. 

 

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