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PPN 11 Percent

In 2022, the Government of Indonesia through the Ministry of Finance officially increases the rate of Value Added Tax (“ VAT ”) from 10 percent to 11 percent starting April 1, 2022 as mandated through Article 7 of Law Number 7 of 2021 on  the Harmonization of Tax Regulations (“ HPP Law ”). This policy is the result of the preparation of the Tax Regulation Harmonization Bill which was approved as a Law by the House of Representatives on 7 October 2021 which was later ratified and promulgated on 29 October 2021 into the HPP Law.


A. VAT Rate Amendment Background

The following are some of the points behind the re-arrangement of the VAT rate policy, including:


  • The performance of Indonesia’s VAT (C-Efficiency) is 63.58%, meaning that Indonesia has only been able to collect 63.58% of the total VAT that should have been collected. This is because there are still goods and services that have not yet entered the system. In addition, because there are still many VAT facilities provided.
  • To expand the tax base, non-taxable goods ( Barang Kena Pajak , “ BKP ”) and non-taxable services ( Jasa Kena Pajak , “ JKP ”) become BKP and JKP so that they can enter the system.
  • High tax expenditure (tax expenditure) (65% of the total 2019 tax expenditure).

11 percent

B. Important Aspects of the Regulation

The following are important points related to changes in VAT setting rates including:


1. Objects and Facilities

    1. Basic goods needed by many people, medical health services, education services, social services get VAT exemption facilities. Middle and small income people still do not have to pay VAT on consumption of basic needs, education services, health services, and social services.
    2. Reductions in VAT exemptions and facilities are provided in order to better reflect justice and be on target, while maintaining the interests of the community and the business world.
    3. All goods and services are BKP/JKP, except:
      • food and drinks served in hotels, restaurants, etc.
      • money, gold bullion for the benefit of the country’s foreign exchange
      • religious services
      • arts and entertainment services
      • hotel services
      • services provided by the government
      • parking service
      • catering or catering services

        The regulation of arts and entertainment services, hospitality services, parking space provision services, and catering or catering services, which are not subject to VAT, are objects of Regional Taxes and Regional Levies ( Pajak Daerah dan Retribusi Daerah , “ PDRD ”). Furthermore, Article 4A paragraph (3) regulates services that are not subject to VAT, including:
    4. medical health services;
    5. social services;
    6. postage service with postage;
    7. financial services;
    8. insurance services;
    9. education services;
    10. non-advertising broadcasting services;
    11. public transportation services on land and in water as well as domestic air transportation services which are an inseparable part of foreign air transportation services;
    12. labor services;
    13. public telephone services using coins and;
    14. money transfer service by postal money order
  1. Re-arrangement of the details of the criteria for VAT facilities, originally there were 15 criteria for VAT facilities, to 10 criteria for VAT facilities.
  2. This arrangement is intended to expand the VAT base while still taking into account the principles of justice, the principle of expediency, especially in advancing the general welfare and the principle of the national interest. The aim of this policy is to optimize state revenues by


11 percent

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2. Rate Increase


Basically, Indonesia’s VAT rate is still below the global average rate of 15.4% (fifteen point four percent). Taking into account the purchasing power and economic recovery, the tariff increase is carried out in stages:


  1. 11% effective April 1, 2022;
  2. 12% applies no later than January 1, 2025;


which is aimed at increasing state revenue in meeting the needs of the community at this time, namely in order to overcome the impact of the Covid-19 pandemic in the form of social assistance vaccines and others.


3. Convenience and Simplicity

  1. To provide convenience in calculating and depositing the amount of tax, it can be done using the Tax Imposition Basis which includes the Selling Price for Replacement of Import Value, Export Value or other values.
  2. To provide convenience in calculating and depositing the amount of tax, it can be done using the Tax Imposition Basis which includes the Selling Price of Replacement of Import Value, Export Value or other values.
  3. For convenience in collecting VAT, certain types of goods and services or certain business sectors apply a “Final” VAT rate, for example 1%, 2% or 3% of business circulation as regulated by a Regulation of the Minister of Finance.



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Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.