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Aji Mukti Saputra Articles Nov 26 2022

VAT RETURN RATE PROVISIONS POST THE APPLICATION OF THE HPP LAW

In connection with the increase in the VAT rate to 11% which took effect from April 1, 2022 in accordance with Law Number 7 of 2021 (UU HPP), many taxpayers do not know what the provisions for returns are if the returns are made after April 1. 2022 with a VAT rate of 11%, but for BKP/JKP transactions that occurred before April 1, 2022, which at that time were still using a 10% VAT rate, the following is an example of a case:

"In June 2022, PT ABC received a return note from PT XYZ with a VAT value of 11% for transactions in January 2022, at which time PT ABC collected 10% VAT to PT XYZ, but when it returned in June 2022, PT XYZ includes a VAT value of 11% on the return note for the Tax Invoice made when the VAT rate was still 10% and has been successfully uploaded in the PT XYZ e-Faktur application."

For this case example, below are the provisions governing the problem, namely as follows:

  1. Law Number 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP), stipulates, among other things, the following .
  1. Article 4 paragraph (1) letter a and letter c, that Value Added Tax is imposed on the delivery of Taxable Goods and Taxable Services within the Customs Area by Entrepreneurs.
  2. Article 5A paragraph (1), that Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods upon delivery of returned Taxable Goods can be deducted from Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods payable in the Tax on the return of the said Taxable Goods.
  3. Article 5A paragraph (2), that the Value Added Tax on the delivery of Taxable Services which is canceled, either in whole or in part, can be deducted from the Value Added Tax payable in the Tax Period when the cancellation occurs.
  1. Article 7 paragraph (1), that the rate of Value Added Tax is:
    1. in the amount of 11% (eleven percent) which will take effect on April 1, 2022;
    2. in the amount of 12% (twelve percent) which will take effect no later than January 1, 2025.
  2. Article 11 paragraph (1) letter a and letter c, that the tax payable occurs at the time of delivery of the Taxable Goods or the delivery of the Taxable Services.
  3. Article 11 paragraph (2), that in the event that payment is received before the delivery of the Taxable Goods or prior to the delivery of the Taxable Services or in the event that the payment is made before the commencement of the utilization of the Intangible Taxable Goods or the Taxable Services from outside the Customs Area, when the tax is payable is at the time of payment.
  4. Article 13 paragraph (1) letter a and letter b, that a Taxable Entrepreneur is obliged to make a Tax Invoice for each:
    1. delivery of the Taxable Goods as referred to in Article 4 paragraph (1) letter a or letter f and/or Article 16D; and/or
    2. delivery of Taxable Services as referred to in Article 4 paragraph (1) letter c.
  5. Article 13 paragraph (1a), that the Tax Invoice as referred to in paragraph (1) must be made on:
    1. when the delivery of the Taxable Goods and/or the delivery of the Taxable Services;
    2. at the time of receipt of payment in the event that receipt of payment occurs before the delivery of the Taxable Goods and/or before the delivery of the Taxable Services;
    3. when receiving the payment of the term in the case of handing over a part of the work stage; or
    4. other times stipulated by or based on a Minister of Finance Regulation.
      1. Regulation of the Minister of Finance Number 65/PMK.03/2010 concerning Procedures for Reducing Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods on Returned Taxable Goods and Value Added Tax on Canceled Taxable Services (PMK-65 /2010), regulates among others the following.
    1. Article 1 number 10, that the Return of Taxable Goods is the return of Taxable Goods either in part or in whole by the Purchase of Taxable Goods.
    2. Article 1 number 11, that Cancellation of Taxable Services is the cancellation of all or part of rights or facilities or facilities by the party receiving Taxable Services.
    3. Article 2 paragraph (1), that in the event that the Taxable Goods delivered are returned (returned) by the Buyer, the Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods from the returned Taxable Goods can reduce the Output Tax and Sales Tax on Luxury Goods payable by Sales Taxable Entrepreneurs and reduces:
      1. Input Tax from the Buyer's Taxable Entrepreneur, in the event that the Input Tax on the returned Taxable Goods has been credited;
      2. costs or assets for the Buyer's Taxable Entrepreneur, in the event that the tax on the returned Taxable Goods is not credited and has been charged and as costs or have been added (capitalized) in the acquisition price of the assets; or
      3. costs or assets for Buyers who are not Taxable Entrepreneurs in terms of Value Added Tax or Value Added Tax and Sales Tax on Luxury Goods on the returned Taxable Goods have been charged as costs or have been added (capitalized) to the acquisition price of said assets.
    4. Article 2 paragraph (2), that in the event that the Taxable Services delivered are apparently canceled, either in part or in whole by the Service Recipient, the Value Added Tax of the canceled Taxable Services reduces the Output Tax payable by the Taxable Entrepreneur who provides the Taxable Service Tax and deduct:
      1. Input Tax from a Taxable Entrepreneur Recipient of Services, in the event that the Input Tax on Taxable Services that has been canceled has been credited;
      2. costs or assets for the Taxable Entrepreneur Recipient of the Service, in the event that the Value Added Tax on the canceled Taxable Services is not credited and has been charged as a cost or has been added (capitalized) to the acquisition price of the said asset; or
      3. costs or assets for Service Recipients who are not Taxable Entrepreneurs in the event that the Value Added Tax on the canceled Taxable Services has been charged as a cost or has been added (capitalized) to the acquisition price of said assets.
    5. Article 2 paragraph (3), that the Return of Taxable Goods is deemed not to have occurred in the event that the returned Taxable Goods are replaced with the same Taxable Goods, both in physical quantity, type and price.
    6. Article 3 paragraph (1), that the time when the Taxable Goods is returned is when the Taxable Goods are returned by the Buyer.
    7. Article 3 paragraph (2), that the moment of cancellation of taxable services is the time when the whole or part of the rights or facilities or facilities are canceled by the service recipient.
    8. Article 4 paragraph (1), that in the event of a return of the Taxable Goods as referred to in Article 2 paragraph (1), the Buyer must make and submit a note of return to the Seller's Taxable Entrepreneur.
    9. Article 4 paragraph (2), that the return note as referred to in paragraph (1) must contain at least:
      1. serial number of the return note;
      2. number, serial code, and date of the Tax Invoice of the returned Taxable Goods;
      3. the name, address and Taxpayer Identification Number of the Buyer;
      4. name, address, Taxpayer Identification Number of Taxable Entrepreneur Taxable Seller;
      5. type of goods, total selling price of the returned Taxable Goods;
      6. Value Added Tax on Taxable Goods that are returned, or Value Added Tax and Sales Tax on Luxury Goods on Taxable Goods classified as luxury that are returned;
      7. the date of making the return note; and
      8. name and signature of the person entitled to sign the return note.
    10. Article 4 paragraph (3), that the return note as referred to in paragraph (1) must be made when the Taxable Goods are returned.
    11. Article 5 paragraph (1), that in the event of cancellation of the delivery of Taxable Services as referred to in Article 2 paragraph (2), the Service Recipient must prepare and submit a note of cancellation to the Taxable Entrepreneur who provides the Taxable Services.
    12. Article 5 paragraph (2), that the cancellation note as referred to in paragraph (1) must contain at least:
      1. number of cancellation note;
      2. number, serial code and date of the Tax Invoice from the canceled Taxable Services;
      3. name, address and Taxpayer Identification Number of Service Recipient;
      4. name, address, Taxpayer Identification Number of Taxable Entrepreneurs who provide Taxable Services;
      5. type of service and amount of replacement of canceled Taxable Services;
      6. Value Added Tax on canceled Taxable Services;
      7. the date of making the cancellation note; and
      8. name and signature of the person entitled to sign the cancellation note.
    13. Article 5 paragraph (3), that the cancellation note as referred to in paragraph (1) must be made when the Taxable Services are cancelled.
    14. Article 6 paragraph (1), that the reduction of Output Tax or Output Tax and Sales Tax on Luxury Goods by the Sales Taxable Entrepreneur and/or Taxable Entrepreneur of Taxable Service Provider as referred to in Article 2 paragraph (1) and paragraph (2) ) is carried out during the Tax Period when the Return of Taxable Goods or Cancellation of Taxable Services as referred to in Article 3 occurs.
    15. Article 6 paragraph (2), that the reduction of Input Tax, reduction of assets, or reduction of costs, by the Buyer or Service Recipient as referred to in Article 2 paragraph (1) and paragraph (2) is carried out in the Tax Period when the return of the Taxable Goods occurs or Cancellation of Taxable Services as referred to in Article 3.

Based on the provisions and taking into account the problems referred to in the description above, the following conclusions can be conveyed:

  1. Calculation of VAT payable listed in the Tax Invoice or certain documents that have an equivalent position with a Tax Invoice using the VAT rate that applies before April 1, 2022 in the event that when the VAT payable as stipulated in the VAT Law occurs before April 1, 2022, and a Tax Invoice or certain documents whose position is equivalent to a Tax Invoice made before April 1, 2022.
  2. Calculation of the VAT payable listed on the Tax Invoice or certain documents whose position is equivalent to the Tax Invoice uses the VAT rate effective from April 1, 2022 in the event:
    1. when the VAT payable as stipulated in the VAT Law occurs before April 1, 2022, but a Tax Invoice or certain documents whose position is equated with a Tax Invoice is made since April 1, 2022; or
    2. when the VAT payable as stipulated in the VAT Law occurs from April 1, 2022, and Tax Invoices or certain documents whose position is equated with Tax Invoices are made from April 1, 2022.
  3. In case of:
    1. returns the BKP, the BKP buyer must make and submit a note of return to the PKP seller by including at least the information as stipulated in Article 4 paragraph (2) PMK-65/2010; and
    2. cancellation of delivery of JKP, the recipient of JKP must make and submit a note of cancellation to the PKP giving JKP by including at least the information as stipulated in Article 5 paragraph (2) PMK-65/2010.
  4. Making a return note as referred to in letter c number 1) or cancellation note as referred to in letter c number 2), refers to the Tax Invoice from BKP that is returned or JKP that is canceled. Thus, then:
    1. the calculation of VAT from the returned BKP which is included in the return note as stipulated in Article 4 paragraph (2) letter f PMK-65/2010, still uses the VAT rate used in the Tax Invoice from the returned BKP; and
    2. the calculation of VAT from canceled JKP that is included in the cancellation note as stipulated in Article 5 paragraph (2) letter f PMK-65/2010, still uses the VAT rate used in the Tax Invoice from the canceled JKP.

In connection with the description above, PT XYZ should make a return note with a VAT rate of 10%, because the Tax Invoice that is returned uses a VAT rate of 10%, if PT XYZ has already uploaded the return note and has been successful, then cancellation can be made or a replacement is made, that's what we can convey and hopefully it can help all of you.