The government is setting up the necessary facilities and infrastructure ahead of the core tax system implementation in 2025. One of the key steps taken in early September 2024 was the reaffirmation of the use of the National Identification Number (Nomor Induk Kependudukan / NIK) and Identity Number for Place of Business Activity (Nomor Identitas Kegiatan Usaha / NITKU). Through the official announcement of the Director General of Taxes (DGT) Number PENG-4/PJ.09/2024, the government regulated the use of the Taxpayer Identification Number (Nomor Pokok Wajib Pajak / NPWP) and NITKU.
This announcement covered several important aspects, including the centralization of Value Added Tax (VAT) location. The government emphasized four key points in this announcement:
- VAT-able Entrepreneurs (Pengusaha Kena Pajak / PKP) who do not submit a notification of the centralization of VAT-payable location by April 30, 2024, will not be subject to centralization of VAT-payable location ex officio at the place of residence and/or domicile as of July 1, 2024.
- The implementation of the centralization of VAT-payable location centralization ex officio at the place of residence or domicile will be carried out simultaneously with the implementation of the Core Tax Administration System (core tax), with further details to be determined by the DGT.
- PKP who, as of the announcement Number PENG-4/PJ.9/2024, have not submitted a notification of the centralization of VAT-payable location, must use the central NPWP for central taxpayers with PKP status and the branch NPWP for branch taxpayers with PKP status, following the provisions as stipulated in PER6/PJ/2024 in implementing VAT rights and obligations.
- For the convenience of PKP, those who have not centralized the VAT-payable location are still advised to submit a notification of centralization of the VAT-payable location at the place of residence or domicile, following the procedures stipulated in the DGT Regulation Number PER-11/PJ/2020 regarding the Determination of One or More Locations of Centralization of VAT-payable Location.
Through this article, we will discuss the PKP centralization procedures according to tax regulations. In general, tax provisions stipulate that VAT is payable wherever the taxable goods or taxable services are delivered. This means if a taxpayer has 10 branches that deliver taxable goods and services, then all branches are required to issue tax invoices for orderly tax administration.
However, tax provisions also allow taxpayers to centralize the VAT payable for administrative convenience. This is regulated in the DGT Regulation Number 19 of 2010 regarding the Determination of One or More Locations of Value Added Tax Payable Locations as amended by the DGT Regulation Number 11 of 2020.
Based on these provisions, PKPs with multiple businesses where VAT is collected may choose to centralize their VAT administration and reporting. To obtain VAT-payable centralization, a PKP must submit a notification electronically or in writing to the Head of the DGT Regional Office where the centralization is carried out, with a copy addressed to the registered tax office (Kantor Pelayanan Pajak / KPP).
However, the following six residences or domiciles are prohibited as centralized locations for VAT payable:
- bonded stockpiling areas, including bonded zones;
- special economic zones;
- free trade zones;
- other areas that have tax facilities;
- locations with a facility that relaxes conditions for the importation of goods for export; and/or
- locations used for business activities in the field of transfer of land and/or buildings,
- locations without actual business activities or that do not carry out administration for deliveries and financial activities.
Centralization Notification
Initially, it was explained that the centralization notification is submitted to the regional office of the centralization location, with a copy addressed to the KPP where the centralization is registered. Taxpayers must attach several documents to the centralization notification letter, including:
- A statement letter confirming that delivery and financial administration are carried out centrally at the selected VAT-payable location.
- A statement letter confirming that the centralization of VAT-payable location and the VAT-payable location to be centralized does not include an exempted place of residence, domicile, or business activity.
- A statement letter confirming that the centralization of VAT-payable location has actual business activities and/or carries out administration for deliveries and financial activities.
- A special power of attorney, in cases where the notification is made by an agent, following tax laws and regulations.
Centralization Decision
There are two possible outcomes for the centralization notification submitted by the taxpayer. First, if the PKP meets the requirements, the Head of the Regional Office, on behalf of the DGT, issues a Centralization Decision Letter. Second, if the PKP has not met the VAT centralization requirements, the Head of the Regional Office, on behalf of the DGT, issues a Notification Letter.
Both the Centralization Decision Letter and the Notification Letter of not meeting the requirements must be issued within fourteen working days from the complete receipt of the notification. If the Head of the DGT Regional Office at the centralized location does not issue a Decision Letter within this period, the PKP's notification is deemed to have met the requirements, and a Centralization Decision Letter must be issued, effective from the next tax period after fourteen working days.
Revocation of Centralized Location
The Head of the DGT Regional Office, on behalf of the DGT, can revoke the centralization of VAT location based on notification from the taxpayer or ex officio. The taxpayer's notification regarding the revocation of the centralization of VAT location is submitted to the Head of the Regional Office of the centralized location, with a copy addressed to the Head of the KPP. Within fourteen working days, the Head of the DGT Regional Office issues a decision to revoke the centralization of VAT. If no Decision Letter is issued within fourteen working days of receiving the complete notification, the revocation of VAT centralization is deemed to have been received.
Relevant Provisions
- Law of the Republic of Indonesia Number 8 of 1983 regarding Value Added Tax and Sales Tax on Luxury Goods as amended by Law of the Republic of Indonesia Number 7 of 2021 regarding Harmonization of Tax Regulations.
- DGT Regulation Number 19 of 2010 regarding the Determination of One or More Locations of Value Added Tax Payable Locations as amended by the Regulation of the DGT Number 11 of 2020.
