value added tax (“vat”) not collected on certain ......transportation equipment imported by...
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Tax Alert: VAT not collected on certain transportation equipment and related services | 1
Value Added Tax (“VAT”) not collected on certain transportation equipment and related services
Tax AlertAugust 2019
Summary
On 8 July 2019, the Indonesian Government issued Government Regulation No. 50/ 2019 (“GR-50”) as a replacement of Government Regulation No. 69/ 2015 (“GR-69”). GR-50 will be effective on 5 September 2019.
GR-50 provides a tax facility, aiming to encourage the competitiveness of the land, water and air transportation industries and to guarantee the availability of sufficient defense and security equipment to protect the Indonesian territory. It should also provide legal certainty on the non-collection of VAT facility for certain transportation equipment and related services.
This alerts aims to provide further explanation on GR-50.
2 | Tax Alert: VAT not collected on certain transportation equipment and related services
The key aspects of GR-50 are:
1. VAT not collected on certain transportation equipment
VAT will not be collected on the import and/or delivery of certain transportation equipment as follows:
a. Transportation equipment imported by and/ or delivered to the Ministry of Defense, the Indonesian National Army and the Indonesian State Police, which covers:
(i) Water transportation equipment and parts
(ii) Under water transportation equipment (e.g. submarines) and parts;
(iii) Air transportation equipment and parts;
(iv) Train and parts;
(v) Shipping safety equipment and human safety tools; and
(vi) Flight safety equipment and human safety tools.
b. Transportation equipment imported by another party appointed by the Ministry of Defense, the Indonesian National Army and the Indonesian State Police, which covers the same six points as paragraph (a) above.
c. Water transportation equipment imported by and/ or delivered to and used by a national commercial shipping company, national fishing company, national port service company, or national river, lake and ferry transportation service company, according to its business activities, which consist of:
(i) Sea freight ship and parts;
(ii) River transport ship and parts;
(iii) Lake transport ship and parts;
(iv) Ferry transport ship and parts;
(v) Fishing vessel and parts;
(vi) Guide ship and parts;
(vii) Tugboat and parts;
(viii) Barge and parts;
(ix) Shipping equipment; and
(x) Shipping safety equipment and human safety tools.
d. Air transportation equipment imported by and/ or delivered to and used by a national commercial airline company, which consists of:
(i) Airplane and parts;
(ii) Flight safety equipment and human safety tools; and
(iii) Repair and maintenance equipment.
e. Air transportation equipment imported by and/ or delivered to another party appointed by the national commercial airline company, that is used to provide airplane repair and maintenance services to a national airline company, which consists of:
(i) Airplane parts; and
(ii) Airplane repair and maintenance equipment.
f. Train equipment imported by and/ or delivered to and used by a public railway service company and/ or public railway infrastructure company, which consist of:
(i) Train and parts;
(ii) Repair and maintenance equipment; and
(iii) Railway infrastructure.
g. Components or materials imported by and/ or delivered to another party appointed by the public railway service company and/ or public railway infrastructure company, which are used to build:
(i) Train;
(ii) Train spare parts;
(iii) Repair and maintenance equipment; and/ or
(iv) Train infrastructure;
that will be used by a public railway service company and/ or public railway infrastructure company.
2. VAT not collected on certain services related to certain transportation equipment
Services related to certain transportation equipment where VAT is not collected are as follows:
a. Services delivered to a national commercial shipping company, national fishing company, national port service company, and national river, lake and ferry transportation service company, which consist of:
Tax Alert: VAT not collected on certain transportation equipment and related services | 3
(i) ship leasing service;
(ii) port services, which cover tug service, guide service, mooring service, and docking service; and
(iii) ship repair and maintenance service.
b. Services delivered to a national commercial airline company, which consist of:
(i) Airplane leasing service; and
(ii) Airplane repair and maintenance service.
c. Train repair and maintenance service delivered to a public railway service company and/ or public railway infrastructure company.
3. Utilization of services outside of the Indonesian customs area
VAT is not collected on airplane leasing services utilized by a national commercial airline company from outside of the Indonesian customs area.
4. Limitation of the non-collection of VAT
a. For certain transportation equipment stated in items 1(c) up to 1(g) where the import and/ or delivery has obtained a VAT not collected facility, if within four years after their importation and/ or delivery:
(i) are used not in accordance of their original purpose; or
(ii) are transferred to other parties, whether in part or in a whole;
the VAT not collected during the importation and/ or delivery must be paid within one month after such equipment is transferred, or utilized outside the approved purpose.
b. If within one month the VAT payable is not paid, the Directorate General of Tax will issue a tax assessment letter in accordance with the prevailing tax laws and regulations.
c. The VAT that must be paid cannot be credited.
d. The obligation to pay the VAT payable under paragraph (a) above is not implemented in case the transferred is due to force majeure (e.g. uprising, riot or natural disaster stated by the authorized agency).
5. Transitional provisions
At the time GR-50 is enacted:
a. The limitation on VAT not collected under item 4 is applicable on certain transportation equipment that the import and/ or delivery has received VAT not collected facility under GR-69;
b. All the implementing regulations of GR-69 are still applicable provided they are not in conflict with the provisions under GR-50; and
c. GR-69 will be revoked and no longer valid.
The Minister of Finance will issue the implementing regulation on the conditions and procedures on the import and/ or delivery of certain transportation equipment as well as on the delivery and utilization of services related to certain transportation equipment where VAT is not collected.
Please do not hesitate to contact our Tax Partners or engagement teams.
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