Indonesia VAT Rates and Registration Explained

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With more than 200 million internet users, Indonesia is a powerhouse of the Southeast Asian market. So, if you're selling digital services or SaaS products to Indonesian customers, you need to understand the country's VAT system. The Directorate General of Taxes (DGT) has gotten serious about enforcing VAT compliance for foreign digital service providers, and the penalties for getting it wrong can pile up fast.

This guide breaks down everything you need to know about Indonesia VAT,  from the new 12% rate that kicked in this year to the two different registration schemes you might fall under. We'll cover thresholds, filing requirements, and most importantly, how to stay compliant without drowning in paperwork.

Indonesia’s VAT Rules for Digital and Software Businesses

Digital and software businesses making sales to Indonesian customers are subject to Indonesia VAT. In  Indonesia, VAT is governed by the Directorate General of Taxes (DGT). Unlike many other jurisdictions, once VAT is triggered, you’re required to file and remit on a monthly basis. There’s no quarterly or annual option. 

The Indonesian government treats digital services as fully taxable supplies. This includes SaaS subscriptions, cloud storage, online advertising, digital content, and other software or service delivered over the internet. The same rules apply whether you are selling to businesses or consumers, though the reverse charge applies for B2B sales. 

It’s vital to understand that Indonesia doesn’t wait until you notice your obligation and register. Instead, the DGT monitors transaction volumes and internet traffic data, then invites your company to register once they spot significant activity. If you’re doing business in Indonesia, it’s likely you’ll appear on the DGT’s radar sooner rather than later. Get prepared for Indonesian VAT compliance as soon as you start selling into the country. 

Why Indonesia is a High-Impact VAT Market

With its internet economy projected to reach $330 billion by 2030, Indonesia is one of the fastest-growing digital markets in Asia Pacific. 

And this growth hasn’t gone unnoticed by tax authorities. The Indonesian government has ramped up enforcement efforts, particularly targeting foreign tech companies that previously operated without local tax obligations. They've invested heavily in digital monitoring systems and cross-border enforcement mechanisms.

In the past, tech companies could provide services to Indonesians with limited VAT risk. But now the DGT has made it clear that if you’re selling into Indonesia, you need to get VAT compliant.

Indonesia VAT Rates Explained (11%, 12%, and 0%)

Indonesia's VAT rate officially increased to 12% on January 1, 2025. This is up from the previous 11%. This applies to most digital services and represents the standard rate you'll charge to Indonesian customers.

The rate structure isn't always straightforward, though. Indonesia uses a mechanism involving "other value" calculations that can affect the effective rate in certain situations. For most digital service providers, you'll simply apply the 12% rate to your transaction value. But understanding the full rate structure helps you navigate edge cases and special situations.

Zero-rated supplies also exist in the Indonesian VAT system, primarily for exports. While this rarely applies to digital services sold to Indonesian customers, it becomes relevant if you're doing other business in Indonesia.

Standard VAT Rate on Taxable Goods and Services

Indonesia’s standard VAT rate is 12%. This rate applies to all standard taxable supplies, including SaaS subscriptions, cloud services, digital platforms, and online tools. This rate is applied to the full transaction value before any discounts or promotions.

For example, if you charge IDR 1,000,000 (about $60 US) for a monthly SaaS subscription, you’d add 12% VAT (IDR 120,000) for a total of IDR 1,120,000.

This rate applies uniformly across all digital services. Unlike in some other countries, there’s no reduced rate for educational software, productivity tools or other categories that sometimes get preferential tax treatment. 

Luxury Goods and Special Rates

Indonesia levies an additional luxury tax on some times, but this rarely, if ever, affects digital service providers. Instead, the luxury goods tax targets physical products like high-end vehicles, yachts, and luxury real estate. 

Some digital platforms that facilitate luxury goods transactions might need to understand these rules, but for pure software and digital service providers, the standard 12% rate is what matters.

Zero-Rated Supplies

Zero-rated VAT treatment applies to exports of tangible goods, certain intangible goods, and qualifying services provided outside Indonesia. While the VAT collected is zero, you still need to report these transactions in your VAT returns.

Zero-rating typically doesn't apply to digital services consumed by Indonesian customers. The main exception involves services that are genuinely exported – for instance, if you're providing development services from an Indonesian entity to foreign customers. But for most foreign digital service providers selling into Indonesia, zero-rating isn't relevant to your compliance obligations.

VAT Exemptions and Non-Taxable Transactions

VAT exemptions in Indonesia work differently from zero-rated supplies. While zero-rated supplies still allow you to recover input VAT (if you're eligible), tax exempt supplies don't provide this benefit.

For digital service providers, exemptions rarely apply directly to your core services. However, understanding exemptions becomes important if you're operating a platform that facilitates exempt transactions or bundling your services with exempt supplies.

Exempt Goods

Indonesia exempts basic necessities and some regulated goods from VAT. This includes unprocessed agricultural products, basic food staples, mining products in their raw state, and certain essential goods determined by government regulation.

Digital platforms that facilitate sales of these goods need to understand which transactions are exempt. If you're running a marketplace or e-commerce platform, you'll need systems to identify and properly treat exempt goods.

For pure software providers, these exemptions typically don't apply unless you're bundling physical goods with your digital services.

Exempt Services

Several service categories are VAT exempt in Indonesia, including:

• health services
• educational services provided by formal institutions
• certain financial services
• religious services 
• public transportation service.

This can affect digital service providers in some edge cases. For example, educational platforms need to distinguish between formal educational services (potentially exempt) and general online courses (taxable). Fintech platforms must understand which financial services qualify for exemption versus which are fully taxable. It’s vital to understand how Indonesian tax law classifies your digital service. 

VAT Registration Paths in Indonesia

Indonesia offers two distinct VAT registration schemes for businesses, each with different requirements, benefits, and compliance obligations. Your business structure and the nature of your presence in Indonesia determine which path you'll take.

Foreign digital service providers typically use the PMSE scheme, while companies with Indonesian presence must use the regular VAT scheme. Let's break down both options.

VAT Filing and Compliance Process

PMSE Scheme for Non-Resident Digital Providers

The Provision of Taxable Services by E-Commerce (PMSE) scheme is Indonesia’s simplified VAT scheme for foreign digital service providers with no physical presence in Indonesia. Most non-resident digital and SaaS companies will choose this path when registering.

Under PMSE, you don't need a local entity, permanent establishment, or Indonesian tax representative (though having one can help with practical matters). The scheme streamlines compliance by eliminating many requirements of the regular VAT system while still ensuring proper tax compliance.

Unlike other jurisdictions, the PMSE scheme operates on an invitation basis. The DGT monitors digital service providers and invites them to register when thresholds are met. You can also voluntarily notify the DGT if you know you've crossed the thresholds, but there's no legal requirement to self-report before being invited.

When PMSE Registration is Triggered

PMSE registration becomes mandatory when you hit either transaction value thresholds or user/traffic thresholds. You only need to meet one set of criteria, not both.

Transaction value thresholds:

• IDR 600,000,000 (about $36,000 USD) in annual transaction value, or
• IDR 50,000,000 (about $3,000 USD)  in monthly transaction value

User/traffic thresholds:

• 12,000 users annually based on traffic or access data, or
• 1,000 users monthly based on traffic or access data

The DGT uses various data sources to monitor these thresholds, including payment processor data, app store information, and web traffic analytics. They're reported as highly effective at identifying high-volume providers, so don't assume you're flying under the radar.

PMSE Registration Process via Coretax

Businesses register for the PMSE scheme through the DGT's Coretax online portal. If you're invited to register, you'll receive a notification with instructions and deadlines. The process is relatively straightforward compared to other countries' registration requirements.

PMSE VAT Rules

Operating under PMSE means following specific rules that differ from the regular VAT scheme. The 12% VAT rate applies to all B2C transactions with Indonesian consumers. B2B transactions typically fall under the reverse charge mechanism, meaning your business customer handles the VAT obligation.

You cannot claim input VAT under the PMSE scheme. Any VAT you pay on Indonesian business expenses becomes a cost to your business. This simplification trade-off works well for companies with minimal Indonesian costs but can be expensive if you have significant local expenses.

Monthly VAT returns are mandatory under PMSE, due by the end of the following month. You'll need to report total sales to Indonesian customers and calculate VAT based on transaction values. The system is designed for simplicity – no complex input VAT calculations or detailed categorization required.

Regular VAT Scheme for Local Entities (PKP)

Companies with physical presence in Indonesia must register under the regular VAT scheme, Pengusaha Kena Pajak (PKP), or “Taxable Entrepreneur.” These rules apply from your very first sale. If you have a presence in Indonesia, there is no grace period or threshold before needing to register.

Physical presence includes having an office, employees, a permanent establishment, or any form of local entity in Indonesia. If you're incorporating an Indonesian subsidiary or establishing a branch office, you'll need PKP registration as part of your setup process.

The regular scheme is more complex than PMSE but offers benefits like input VAT recovery. For companies with significant Indonesian operations or costs, these benefits can outweigh the additional compliance burden.

Registration via DJP Online

Businesses with a presence in Indonesia should register as a PKP through the DJP Online e-Registration system. Note that you’ll first need a Nomor Pokok Wajib Pajak (NPWP), which is Indonesia’s taxpayer identification number, before registering. 

The registration process typically takes 3-4 weeks but can extend longer if documentation issues arise. Using a local tax advisor is almost essential given the complexity and language requirements.

Rights and Obligations

PKP status comes with rights and obligations as an Indonesian taxpayer. 

Rights include:

• Ability to claim input VAT on business purchases
• Authority to issue tax invoices to customers
• Access to VAT refunds (though the process is complex)
• Ability to zero-rate qualifying exports

Obligations include: 

• Issuing e-invoices for all taxable supplies
• Monthly VAT return filing and remittance
• Maintaining detailed VAT records
• Undergoing potential tax audits
• Using the Indonesian e-invoicing system

The e-invoicing requirement is especially important. Indonesia requires all PKPs to issue electronic tax invoices through the DGT's system, with specific formatting and numbering requirements. Non-compliance with e-invoicing rules triggers separate penalties beyond standard VAT penalties

VAT Calculation, Invoicing, and Reporting

VAT calculation in Indonesia follows the standard procedure. For most transactions, apply the standard 12% rate. However, invoicing and reporting requirements vary significantly between PMSE and regular schemes.

For PMSE providers, VAT appears as a line item on your regular commercial invoices. You'll show the sale amount, VAT amount (12% of the sale amount), and the total amount. Keep these invoices as supporting documentation for your monthly returns.

PKP entities must issue official Indonesian tax invoices (faktur pajak) through the e-invoicing system. These have specific numbering, format, and content requirements that must be followed exactly.

VAT Invoices

PMSE providers can use their standard invoicing systems with some modifications to meet Indonesian requirements. Your invoices should clearly show the VAT amount charged and include a statement that Indonesian VAT has been applied.

Required elements for PMSE invoices:

• Your company name and identification
• Customer details
• Transaction date
• Description of services
• Transaction amount in original currency
• IDR equivalent if billed in foreign currency
• VAT amount (12% of transaction value)
• Total amount including VAT

PKP entities face stricter requirements with the e-faktur system. Each tax invoice needs a unique number from the DGT's sequence, must be issued within specific timeframes, and requires digital signatures. The system integration can be complex, often requiring local IT support or specialized software.

VAT Returns and Reporting Cadence

All VAT, under both the PMSE and regular schemes, is required to be filed monthly by the end of the following month. For example, if your VAT period is April, then your VAT return is due by May 31.

PMSE returns are relatively simple. You report your total taxable sales to Indonesian customers and calculate VAT due. You'll file through the same Coretax portal used for registration. The system accepts returns in English and handles foreign currency conversions.

PKP returns are more complex, requiring detailed transaction reporting, input VAT claims, and reconciliation with e-invoicing data. You'll need to break down sales by customer type, reconcile with issued tax invoices, and justify any input VAT claims. Most companies use local accountants or tax software to manage this complexity.

VAT Remittance and Accepted Currencies

VAT payment is due at the end of the month following the reporting period. Late payments trigger an interest  charge of 2% per month, so paying on time is important.

The DGT issues specific billing codes and payment references for each VAT payment. You'll receive these through your Coretax or DJP Online account after filing your return. Each payment needs the correct reference to be properly credited to your account.

Payment can be made through Indonesian banks or international wire transfers. The DGT has streamlined international payment processing for PMSE providers, but you'll still need to account for processing time and potential bank fees.

Currency Rules

The currency used to remit VAT depends on the scheme under which you are operating.

PMSE operators can remit VAT in either Indonesian Rupiah (IDR) or US dollars (USD). This flexibility helps avoid multiple currency conversions for companies billing in USD. If you choose USD remittance, the DGT handles the conversion at official rates.

Regular PKP entities must remit all VAT payments in Indonesian Rupiah, with no exceptions. If operating as a PKP, you’ll need an Indonesian bank account to facilitate VAT payments.

Penalties and Compliance Risks

The DGT is actively pursuing non-compliant companies and penalties can compound quickly.

Painfully, Indonesian VAT penalties are cumulative. If you miss your registration deadline, file returns late, and pay late that leads to three separate penalties which can, in many cases, dwarf your actual VAT liability. 

Compliance is vital if you do business in Indonesia. The DGT has demonstrated ability to identify non-compliant providers through payment processor data, app store information, and other digital footprints. They've also shown willingness to pursue foreign companies through diplomatic channels and international tax agreements.

Common Penalties

Late registration triggers a flat IDR 1,000,000 penalty. This applies if you fail to register within the deadline specified in your invitation letter or, for PKP entities, if you don't register before making taxable supplies.

Late filing penalties are percentage-based at 2% per month of the VAT amount, capped at 48% (24 months). An IDR 10,000,000 VAT liability filed 6 months late faces IDR 1,200,000 in penalties. These penalties apply even if no VAT is due for the period.

Incorrect or missing VAT invoices trigger penalties of 1% of transaction value. For PKP entities using e-invoicing, additional penalties apply for system non-compliance. PMSE providers face less invoice-related risk but should still maintain proper documentation.

How Sphere Makes Indonesia VAT Compliance Simpler

Managing Indonesia VAT compliance manually means tracking thresholds across multiple data sources, navigating registration in Indonesian language portals, calculating VAT in IDR while billing in other currencies, and remembering monthly filing deadlines. Trying to juggle all these balls in the air without automation is a recipe for disaster. 

Sphere automates the entire Indonesia VAT compliance lifecycle. Sphere connects directly with your billing systems and automatically monitors when you're approaching Indonesian thresholds. No more spreadsheet tracking or manual calculations. You'll know exactly when registration becomes necessary.

Monitoring and Exposure Tracking

Sphere continuously tracks both transaction values and user counts against Indonesian thresholds. This includes aggregating data from all your sales channels giving you a complete picture of your Indonesian VAT exposure. 

When you’re approaching registration thresholds, we’ll alert you with enough lead time to prepare. So when the DGT comes calling, you’ll be ready to comply from day one. 

Sphere’s monitoring goes beyond simple threshold tracking. We also identify B2B versus B2C transactions, properly apply reverse charge rules, and flag any transactions that might need special treatment under Indonesian VAT law.

Registration and Calculation

When registration time comes, Sphere handles both PMSE and regular VAT scheme registrations. We prepare your documentation package, manage submission through the appropriate portals, and handle any follow-up requests from the DGT.

Once registered, our calculation engine automatically applies the correct 12% rate to Indonesian transactions. We handle currency conversions, identify exempt supplies, and properly treat B2B reverse charge scenarios. 

For businesses operating under multiple schemes (PMSE in some countries, regular registration in others), Sphere maintains the logic to apply the right rules to each transaction. No manual scheme selection or configuration needed.

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Filing, Payments, and Reporting

Sphere automates your monthly Indonesian VAT returns, eliminating the deadline stress and manual preparation. We pull transaction data, prepare returns in the required format, and submit directly to the DGT through their filing portals.

Our embedded payments feature handles VAT remittance without you touching Indonesian banking systems. We manage billing codes, payment references, and currency conversion. You approve the payment in Sphere, and we ensure it reaches the DGT on time with proper attribution.

Monthly compliance reporting shows you exactly what was filed, what was paid, and what's coming due. You'll have full visibility into your Indonesian VAT position with Sphere.

Stay VAT-Compliant in Indonesia With Little Manual Work

Indonesia's digital economy is too big to ignore, but its VAT system is too complex to handle manually. Between monthly filing requirements, dual registration schemes, and active enforcement, you need systems that scale with your growth.

Sphere eliminates these risks by serving as your system of record for Indonesian VAT compliance. From threshold monitoring through payment remittance, we automate the entire compliance lifecycle. You focus on growing your Indonesian market presence, we’ll ensure you stay VAT compliant.