Understanding VAT registration in Indonesia is essential for businesses engaged in taxable activities. A VAT-Registered Business (Pengusaha Kena Pajak / PKP) is required to collect and report Value-Added Tax (VAT) on goods and services.
This article explains the threshold and requirements, registration process, and benefits of becoming a PKP in Indonesia.
Also read: Indonesia’s PPN (VAT) Guide: 2025 Regulation, Rates, Calculation
What is a VAT-Registered Business (PKP) in Indonesia?
In Indonesia, a VAT-Registered Business, or Pengusaha Kena Pajak (PKP), refers to businesses required to collect, report, and pay Value-Added Tax (VAT) on taxable goods and services. This obligation is governed by the 1984 VAT Law and its amendments (Undang-Undang PPN Tahun 1984).
Registration as a PKP is mandatory for businesses exceeding a specific revenue threshold, while smaller enterprises may opt for voluntary registration.
Who Needs to Register for VAT in Indonesia?
A business must register as a PKP if its annual revenue surpasses small business threshold of IDR 4.8 billion (about $250,000 USD or $460,000 AUD). Businesses under this threshold are classified as Pengusaha Kecil and are not required to register, though they may choose to do so voluntarily to gain VAT credits.
PKP status applies to businesses engaged in taxable activities, including:
- Selling taxable goods (Barang Kena Pajak / BKP) or services (Jasa Kena Pajak / JKP)
- Importing/exporting goods and services
- Utilizing intangible goods or services from outside Indonesia
Also check:
VAT Registration Requirements for Individuals and Companies
The Directorate General of Taxes (DJP) oversees VAT registration, which must be done at the Tax Office (Kantor Pelayanan Pajak / KPP) where the business is domiciled.
Required Documents for VAT Registration
For Individuals:
- Copy of ID card (KTP) for Indonesian citizens
- Copy of passport and residence permit (KITAS/KITAP) for foreign nationals
- Business statement letter specifying business activities and location
For Companies:
- Copy of company establishment deed and amendments
- Documents proving business activities at each location
- Identification of all company directors or responsible parties
Also read: Indonesia Corporate Tax Rate: Navigating the Business Landscape
Additional Requirements for Virtual Office Users:
Businesses using a virtual office must submit:
- A contract or agreement with the virtual office provider
- A business certificate or operational permit from local authorities
Also read: EFIN in Indonesia: How to Apply and Use for Tax Filing
How to Get VAT Registered in Indonesia
VAT registration can be completed through the following methods:
- In person: Submit documents at the relevant Tax Office (KPP)
- By post/courier: With a delivery receipt as proof
- Online (if available): Via the DJP’s digital platform
Once submitted, the DJP will process the application and provide a decision within one business day, provided the application is complete. Successful applicants must activate their VAT account and obtain an electronic certificate within three months of approval.
Also read: Tax Allowance in Indonesia: A Key Investment Incentive
Responsibilities of a VAT-Registered Business (PKP)
Becoming a PKP comes with several key responsibilities:
- Issuing Tax Invoices (Faktur Pajak): Every taxable transaction requires an invoice to be issued.
- Collecting VAT: PKP must charge 11% VAT (as of 2022) on taxable goods and services.
- Reporting and Paying VAT: VAT collected (output tax) must be offset against VAT paid on business expenses (input tax). The net amount must be reported in the monthly VAT return (SPT Masa PPN) and paid to the tax authority.
- Maintaining VAT Compliance: Businesses must adhere to VAT laws and regulations, ensuring proper bookkeeping and reporting.
Also read: Filing Annual Corporate Tax Returns in Indonesia (Easy Guide)
Small Business Exemption and Voluntary VAT Registration
Businesses with annual revenue below IDR 4.8 billion are exempt from mandatory VAT registration but may voluntarily register to benefit from VAT input credits (deducting VAT paid on purchases from VAT collected on sales). This can be advantageous for businesses that frequently deal with VAT-registered suppliers or clients.
Why Register as a VAT-Registered Business?
While voluntary registration is optional, becoming a PKP can offer significant advantages:
- Credibility: Many clients and partners prefer working with VAT-registered companies.
- Tax Efficiency: Ability to claim input VAT credits, reducing overall tax liability.
- Legal Compliance: Ensures businesses meet tax obligations, avoiding penalties.
Understanding VAT registration in Indonesia is essential for businesses looking to stay compliant and benefit from tax efficiencies. If your business meets the VAT registration threshold, ensure timely registration to avoid penalties. For those below the threshold, voluntary registration can still provide benefits depending on business needs.
If you need assistance, you can rely on InvestinAsia’s Indonesian VAT/PKP registration services.
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