Minister of Finance Sri Mulyani Indrawati has adjusted the provisions on the procedures for the withholding, remittance, and reporting of Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLGs) by State-Owned Enterprises (Badan Usaha Milik Negara/BUMN) and certain companies directly owned by State-Owned Enterprises.

The provisions on the procedures for the withholding and remittance of VAT and STLGs are outlined in the Minister of Finance Regulation No. 8/PMK.03/2021 concerning Procedures for the Withholding, Remittance, and Reporting of Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods by State-Owned Enterprises and Certain Companies Directly Owned by State-Owned Enterprises as Value Added Tax Withholding Agents (MoF Reg. 8/2021).

MoF Reg. 8/2021 has been issued to provide legal certainty and convenience for State-Owned Enterprises and certain companies that are directly owned by State-Owned Enterprises in carrying out their obligations as VAT withholding agents. The regulation, promulgated on 29 January 2021, has come into effect as of 1 February 2021.

The enactment of MoF Reg. 8/2021 simultaneously revokes the Minister of Finance Regulation No. 85/PMK.03/2012 as amended by the Minister of Finance Regulation No. 136/PMK.03/2012 concerning the Amendment to the Minister of Finance Regulation No. 85/PMK.03/2012 concerning the Appointment of State-Owned Enterprises to Withhold, Remit, and Report Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods, as well as the Procedures of the Withholding, Remittance, and Reporting (MoF Reg. 136/2012).

Further, the enactment of MoF Reg. 8/2021 also revokes the Minister of Finance Regulation No. 37/PMK.03/2015 concerning the Appointment of Certain Business Entities to Withhold, Remit, and Report Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods, as well as Procedures of the Withholding, Remittance, and Reporting (MoF Reg. 37/2015).

Similar to the provisions under the previous regulation, VAT or VAT and STLGs payable on supplies of taxable goods (Barang Kena Pajak/BKP) and/or taxable services (Jasa Kena Pajak/JKP) by counterparties to VAT withholding agents are withheld, paid, and reported by the VAT withholding agents.

The counterparties referred to under this regulation include Taxable Persons for VAT Purposes (Pengusaha Kena Pajak/PKP) that supply BKP and/or JKP to VAT withholding agents. On the other hand, three parties constitute VAT withholding agents under MoF Reg. 8/2021. First, State-Owned Enterprises. Second, State-Owned Enterprises restructured by the government after 1 April 2015 through the transfer of state-owned shares to other State-Owned Enterprises. Third, certain companies that are directly owned by State-Owned Enterprises.

Certain companies refer to companies that are directly owned by State-Owned Enterprises with share ownership of more than 25%. Certain companies that are directly owned by BUMN will be appointed as VAT withholding agents by a minister of finance decree (Keputusan Menteri Keuangan/KMK).

However, if the BKP and/or JKP are supplied by a VAT withholding agent to another VAT withholding agent, the VAT or VAT and STLGs payable shall be withheld, paid, and reported by the VAT withholding agent that supplies the BKP and/or JKP.

The provisions on the VAT rate that must be withheld remain the same as the previous regulation, i.e. 10% multiplied by the tax base (Dasar Pengenaan Pajak/DPP). If the supplied BKP is also subject to VAT, the STLGs rate that must be withheld is the applicable STLGs rate multiplied by the tax base.

MoF Reg. 8/2021 also outlines the six categories of supplies on which VAT and STLGs are not withheld by VAT withholding agents. First, payments totaling a maximum of IDR10 million, including the amount of VAT or VAT and STLGs payable. The payment is not broken down from a transaction of more than IDR10 million.

Second, payment for supplies of BKP and/or JKP which according to statutory provision in the field of taxation are entitled to facilities, i.e. VAT is not withheld or exempted from VAT.

Third, payment for supplies of fuel oil and non-oil fuel by PT Pertamina (Persero). Fourth, payment for supplies of telecommunications services by telecommunications companies.

Fifth, payment for air transportation services supplied by airlines. Sixth, other payments for supplies of goods and/or services which according to statutory provisions in the taxation sector are not subject to VAT or VAT and STLGs.

VAT or VAT and STLGs payable in point one to five are withheld, remitted, and reported by the counterparties as per statutory provisions in the taxation sector.

Moreover, MoF Reg. 8/2021 sets forth the counterparties’ obligation to prepare tax invoices. Counterparties are required to prepare a tax invoice for each BKP and/or JKP supply to VAT withholding agents. The tax invoice must be prepared under the following conditions:

i.	Supplies of BKP and/or supplies of JKP;
ii.	Receipt of payment in the event that the receipt of payment occurs before the supply of BKP and/or before the supply of JKP; or
iii.	Receipt of term payment in the event of supply of a part of a stage of work.

In contrast, the withholding of VAT or VAT and STLGs is carried out upon the following: (i) supplies of BKP and/or supplies of JKP; (ii) at the time of receipt of payment if the payment is received prior to the supply of BKP/JKP; or (iii) withholding is performed upon receipt of term payment if part of work is supplied.

VAT withholding agents are subsequently required to remit VAT or VAT and STLGs that have been withheld using a Tax Payment Slip (Surat Setoran Pajak/SSP) or other administrative means equivalent to SSP no later than the 15^th of the following month after the tax period in which the withholding ends.

SSP or other administrative means equivalent to the SSP are prepared by the VAT withholding agent on behalf of the counterparty by stating the Taxpayer Identification Number (Nomor Pokok Wajib Pajak/NPWP), name and address of the counterparty as well as the code and the serial number of the tax invoice. Next, the VAT withholding agent must submit a printed, copy, or photocopy of the SSP or other administrative means equivalent to the SSP to the counterparty.

Subsequently, the VAT withholding agent is obliged to report the VAT or VAT and STLGs that have been withheld and remitted using the Periodic VAT Return for the VAT withholding agent. The reporting is to be performed no later than the end of the following month after the tax period in which the withholding ends.

Periodic VAT Return for VAT withholding agents must be attached by a nominative list of tax invoices and SSP or other administrative means equivalent to the SSP. Violation of the provisions on the withholding, remittance, and reporting shall be subject to penalties as per statutory provisions in the field of taxation.

In connection with the issuance of MoF Reg. 8/2021, Minister of Finance Sri Mulyani has stipulated the Minister of Finance Decree No. 30/KMK.03/2021 concerning the Stipulation of Certain Companies Directly Owned by State Owned Enterprises as Value Added Tax Withholding Agents (MoF Decree 30/2021).

Under the MoF Decree, the Minister of Finance has appointed 28 state-owned subsidiaries as VAT withholding agents. The 28 state-owned subsidiaries appointed as VAT withholding agents include PT Pupuk Sriwidjaja Palembang, PT Petrokimia Gresik, PT Pupuk Kujang, PT Pupuk Kalimantan Timur, PT Pupuk Iskandar Muda, and PT Telekomunikasi Selular.

Next, PT Indonesia Power, PT Pembangkitan Jawa-Bali, PT Semen Padang, PT Semen Tonasa, PT Elnusa Tbk, PT Krakatau Wajatama, PT Rajawali Nusindo, PT Wijaya Karya Beton Tbk, PT Kimia Farma Apotek, PT Badak Natural Gas Liquefaction, PT Kimia Farma Trading & Distribution, and PT Tambang Timah.

Furthermore, PT Terminal Petikemas Surabaya, PT Indonesia Comnets Plus, PT Bank Syariah Mandiri, PT Bank BRisyariah Tbk, PT Bank BNI Syariah, PT Waskita Karya Realty, PT PP Properti Tbk, PT Wijaya Karya Realty Tbk, PT HK Realtindo, and PT Adhi Commuter Properties.

Through this decree, the Minister of Finance also states that if a VAT withholding agent that has been stipulated under MoF Decree 30/2021 changes the name of the business entity, the business entity continues to be appointed as a VAT withholding agent. In addition, the Minister of Finance emphasizes that the VAT withholding agents listed under MoF Decree 30/2021 are required to withhold, remit, and report VAT or VAT and STLGs as per MoF Reg. 8/2021.

VAT and STLGs Withholding by State-Owned Enterprises and Certain Companies Owned by State-Owned Enterprises