The Jakarta Post
In an effort to encourage tourist spending and empower small and medium enterprises (SMEs), the government will revise a regulation pertaining to value-added tax (VAT) that would allow foreign tourists to get tax refunds for their spending.
The Finance Ministry’s director general for taxation, Robert Pakpahan, said a new regulation, which will revise Finance Ministerial Regulation No. 76/2010, would allow foreign tourists to apply for VAT refunds with multiple invoices.
“Under the new regulation, we will allow [international tourists] to request VAT refunds as long as the total value of the VAT is a minimum of Rp 500,000 [US$36]. Meanwhile, the invoices could have different purchase dates,” Robert said during a recent dialogue with business representatives in Jakarta.
“Hopefully, we can finish [the new regulation] soon.”
Robert was responding to questions raised by Indonesian Shopping Centers Tenants Association (Hippindo) chairman Budiharjo Iduansjah, who urged the government to revise the existing VAT refund regulation in order to spur retailers’ business activities, particularly those that relied on foreign tourists.
The revision was supposed to come into effect last year in conjunction with the Asian Games, which took place from Aug. 18 to Sept. 2 in Jakarta and Palembang, South Sumatra, so that SMEs could take advantage of the presence of international athletes and visitors during the quadrennial event.
Under the prevailing Finance Ministerial Regulation No. 76/2010, international tourists who wanted a VAT refund for their purchases had to present a single transaction receipt with a VAT worth Rp 5 million which effectively urged tourists to make a single large purchase under the assumption of the current 10 percent VAT rate.
The current regulation also stipulates that the goods had to be purchased within a month before the tourists’ departure.
According to official government website vatrefund.pajak.go.id, only five international airports were able to provide VAT refunds, namely Soekarno-Hatta Airport in Cengkareng, Banten; Kualanamu Airport in Medan, North Sumatra; Adisucipto Airport in Yogyakarta; Juanda Airport in Surabaya, East Java; and Ngurah Rai Airport in Denpasar, Bali.
Foreign tourists staying longer than two months were ineligible for the refund, according to the prevailing regulation.
The minimum threshold of the VAT refund is stipulated in Article 16E of the 2003 VAT Law, with the second paragraph of the article stating that the threshold could be adjusted through the issuance of new a government regulation (PP).
Indonesian Employers Association (APINDO) chairman Hariyadi Sukamdani said the new regulation should be flexible enough in terms of setting the minimum VAT that could be refunded.
He also called on the government to ease procedures for retailers in registering as participants in the VAT refund scheme.
“What is important right now is the ease of registering for the scheme,” said Hariyadi. “We would like for them [retailers] to easily participate in it.”
Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo said principally, the VAT refund was implemented at a reciprocal basis as most countries that adopted the VAT scheme provided the facility.
He said the relaxation of the VAT refund regulation would not greatly affect the tax authority’s revenue, adding that state spending for the tax refund would be offset by bigger transactions expected from more tourist spending.