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Jakarta, Ideatax -- Domestic Value Added Tax (VAT) is a form of tax imposed on goods and services produced or traded within the territory of a country. VAT itself has an important role in generating revenue for the government, and has the potential to have a significant impact on the country's economy
For greater clarity, let's explore together the basic concept of VAT and how its implementation affects various aspects of domestic life.
Basic VAT Concepts
As previously explained, Value Added Tax (VAT) is a type of tax imposed on buying and selling transactions of goods and services to parties registered as taxpayers, both individuals and business entities. Therefore, the parties who have the obligation to collect, deposit and report VAT are sellers or traders.
However, the person who ultimately pays this VAT is the final consumer. Value Added Tax is only imposed and must be paid by business owners or companies that are officially recognized as Taxable Entrepreneurs (PKP).
The purpose of VAT is to collect revenue for the government and reduce the potential impact of inflation. More than that, VAT also acts as a tool to control consumption and encourage investment.
Implementation of Domestic VAT
The following are several important aspects that individual or corporate taxpayers need to understand when implementing VAT domestically.
1. Domestic VAT objects
The object of Value Added Tax (VAT) includes the delivery of Taxable Goods (BKP) and Taxable Services (JKP) within the customs area carried out by entrepreneurs. The customs area itself is the territory of the Republic of Indonesia which includes land, water and air space above it, as well as certain areas in the Exclusive Economic Zone and Continental Shelf to which the Customs Law applies.
The VAT objects imposed domestically include:
- Sales of services and goods within the country.
- Domestic use of imported goods.
- Export of goods and services by registered entrepreneurs.
2. VAT rate
Based on Law no. 42 of 2009, the Value Added Tax (VAT) rate is 11%. However, according to the Tax Harmonization Law, on January 1 2025, the VAT rate will increase to 12%.
Apart from that, there are VAT exemption facilities for basic necessities, educational services, medical health services and social services. This facility aims to help the community at large.
So, that's an explanation of the basic concepts and implementation of domestic VAT. Understanding these basic concepts is of course very important, especially for business actors.
With the right knowledge, you can manage your tax obligations optimally and more efficiently. If you have further questions or need help with taxes, don't hesitate to contact Ideatax.
We are ready to help you understand VAT and provide the best solution for your tax needs.
