The Director General of Taxes has issued provisions on the testing of tax invoices for creditable VAT. The provisions are outlined in the Director General of Taxes Circular No. SE-45/PJ/2021 concerning the Testing of Tax Invoices whose Value Added Tax May be Credited as Input VAT (SE-45/2021).

This regulation has been issued due to the non-uniformity in testing the VAT listed in tax invoices to be credited as input VAT. This circular is intended to provide guidelines on the testing of tax invoices whose VAT can be credited as input VAT.

This circular stipulates that the VAT stated in tax invoices may be credited as input VAT insofar as it does not constitute VAT on expenditures referred to in Article 9 paragraph (8) of Law No. 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods as amended by Law No. 11 of 2020 concerning Job Creation (VAT Law). Moreover, the VAT stated in tax invoices must fulfill formal requirements and material requirements.

To test the material requirements of tax invoices, the underlying transactions of tax invoices are checked in terms of the flow of money, the flow of goods or the acquisition of services, and the flow of documents. Testing is also carried out by confirming tax invoices through the DGT information system. Having performed testing, there are four types of test results on the material requirements of tax invoices.

First, in the event that the testing on the flow of money, the flow of goods or the acquisition of services, and the flow of documents is fulfilled and the confirmation of a tax invoice states “available and conforming”, the VAT stated in the tax invoice constitutes a creditable input VAT. The input VAT may be credited insofar as the tax invoice fulfills the formal requirements and does not constitute VAT on expenditures as referred to in Article 9 paragraph (8) of the VAT Law.

Second, if the test on the flow of money, flow of goods or acquisition of services, and document flow is fulfilled but the tax invoice confirmation states “none”, the VAT stated in the tax invoice constitutes a creditable input VAT. The crediting may be performed if the tax invoice meets the formal requirements and does not constitute VAT on expenditures as referred to in Article 9 paragraph (8) of the VAT Law.

The DGT shall follow up the tax invoice as a means of information as per the provisions on the administration guidelines for the development, utilization, and monitoring of data. Subsequently, the tax invoice is sent to the tax office (Kantor Pelayanan Pajak/KPP) where the seller constituting a Taxable Person for VAT Purposes (Pengusaha Kena Pajak/PKP) is registered for supervision.

Third, if the test on money flow, goods flow or service acquisition, and the flow of documents is not fulfilled but the tax invoice confirmation states “available and conforming”, the VAT stated in the tax invoice cannot be credited as input VAT.

Fourth, if the test on money flow, goods flow or service acquisition, and the flow of documents is not fulfilled but the tax invoice confirmation states “none”, the VAT stated in the tax invoice cannot be credited as input VAT.

With respect to the test results in the third and fourth points, the tax invoice will be followed up as information, data, reports, and complaints as per tax statutory provisions on the implementing guidelines for the development and analysis of information, data, reports, and complaints. The circular was enacted on 20 August 2021.

Provisions on the Testing of Tax Invoices for Creditable VAT