Tax Refund In Indonesia

Tax Refund In Indonesia: All You Need To Know

Between its mesmerizing beaches and bustling street markets, Indonesia has one more thing to offer: tax refunds.

While it might not sound as captivating as a Bali sunset, ensuring you’re savvy with the country’s tax refund system can be equally rewarding.

Let’s embark on this fiscal journey together.

What Is A Tax Refund In Indonesia?

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The term “tax refund” means that any excess amount paid in taxes to the government can be reimbursed by the taxpayer. In companies/businesses, it often happens when employers withhold too much or more than the required amount of tax from the salary of the employees.

In Indonesia, the tax system operates on the basis of tax deductions made on the incomes/salaries/payments or other transactions at the source’s end. This means that the tax is deducted before the payments are done. 

The company pays salary after deducting the tax from the employee’s pay. Other taxes such as VAT or GST are also included in the invoices/receipts.

Eligibility For Tax Refund In Indonesia

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In Indonesia tax deductions are done beforehand, so there are fewer chances/cases of tax refunds. However, under certain circumstances or situations or for some other reasons, tax is refunded or reimbursed by the taxpayer. 

The tax refund can be done for the following reasons:

Over Payment Of Withholding Tax

In Indonesia, the employer or the company pays salary after deducting the income taxes. if the tax deductions exceed the set/required limit, then the employee becomes eligible for the tax refund. 

This happens when the tax liability is lower than the amount that is withheld by the company or the employer.

Over Payment Of VAT

VAT is a Value-Added Tax imposed by the state/government on the value of goods, materials, services, etc. In Indonesia, if the registered business or company has paid more VAT than is required or demanded by the government, the company/business becomes eligible for a refund

This usually happens when the company has made some VAT-exempt purchases, which means the company has paid VAT on goods that have no VAT tax on them. It can also happen if the company overpaid VAT due to tax credit input.

Tax Treaty Benefits

In Indonesia, a non-resident individual or a foreign-based business/company, is entitled to the benefits of a tax treaty between Indonesia and the home country of that individual or company. 

If any excess in the withholding taxes happens the individual or the company will be eligible for a tax refund.

Steps To Claim A Tax Refund In Indonesia

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To claim a tax refund in Indonesia, the individual or the company/business must follow certain steps which are as follows:

  • Proper Documentation: The company or the individual must ensure that all the necessary and required documents or records such as tax invoices, tax receipts, and payment proofs/receipts are present to support the claim of the tax refund.
  • Tax Authority: The individual or the company/business must reach out to the tax office or the relevant tax authority in their area that oversees and deals with the tax affairs. The tax office will help/assist the individual/company regarding the required documents and the forms to fill out, to apply/reclaim for the refund.
  • Request Submission: The individual/company must submit their request for the refund at the tax authority office of DGT (Director Genera Tax). They need to explain the reasons for the refund and provide all the required documents and receipts to support their request.
  • Processing Time: The tax authority within the 12 months of tax refund submission, ponders over the given matter and reviews the claim made by the individual/company. If the tax office finds or deems the refund request valid then the process to refund starts.
  • Approved Tax Refund: if the request to refund the tax is approved then the refunded amount is transferred through the bank or paid in cash to the individual/company.

VAT Tax Refund For Tourists In Indonesia

The Director General of Taxes (DGT), decides issues regarding VAT refunds in Indonesia. For tourists, the Indonesian government provides a facility for VAT tax refunds. VAT is a tax on material goods, services provided, etc.

Tourists or foreign nationals visiting Indonesia can claim back value-added tax (VAT) on purchases from Indonesian stores that are registered as participants in “VAT Refund for Tourists”.

Nontaxable services in Indonesia include medical health services, social services, religious and educational services, public transportation services, hotel services, food services, payphone services, and broadcasting services etc.

VAT refund for tourists is only applicable if the goods are purchased within a month of departing Indonesia. The minimum amount of 500,000 rupiah from one shop with a valid invoice is also important for a refund.

Steps To Claim A VAT Refund 

Free Crop man counting dollar banknotes Stock Photo

Certain steps should be followed by the tourists to reclaim or refund their VAT tax. The following steps should be kept in mind for a VAT refund:

Claim Refund Before Check-In Counter

This involves submitting the VAT refund application at the DGT (Director General Tax) office. Copies of the VAT invoice and payment receipt are submitted with the application.

The Passport and airline tickets are shown and then a refund is received through bank transfer or in cash as the tourist demands.

Claim Refund After Check-In Counter

For this, the same steps are followed except instead of showing the airline ticket the tourist shows the boarding pass to the DGT.

Conclusion

You’re now well-versed in navigating the ins and outs of Indonesia’s tax refund process. With these insights, ensure you reclaim what’s rightfully yours and make your Indonesian experience even sweeter. Every rupiah counts!

Refund Realized!

But wait! There’s lot more that you might be interested in following:

  • Tax Number In Indonesia
  • Tax Declaration In Indonesia
  • Income Tax Brackets In Indonesia

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