The government of Indonesia has actively encouraged foreign investment over the past few years by improving business structures, simplifying licensing processes and improving regulatory framework. With the increased foreign investment, there are a large number of transactions that take place between Indonesian businesses and foreign entities. For businesses intending to invoice clients in Indonesia, it is important they follow the correct format and procedures.
What is an invoice
An invoice is an important document that a seller provides to a buyer in a commercial transaction. This document is important, as it serves as a record of the transaction, contains details of the goods and services exchanged and it is used for tax purposes.
Invoicing clients in Indonesia
In Indonesia an invoice is important, especially for buyers, as it serves as evidence that VAT has been paid. If a tax invoice is not issued, the tax office may impose a sanction. There are various types of invoices that can be issued.
Simple Tax Invoice
For basic transactions a simple tax invoice can be issued. It does not have a prescribed layout and it is not required to be numbered like a standard tax invoice. A simple tax invoice cannot be issued in order to reduce liability as a seller must include it in its VAT reporting.
Standard Tax Invoice in Indonesia
In Indonesia, commercial invoices are required to be accompanied by a tax invoice. The tax invoice displays tax information, while an invoice contains more detailed information on the goods sold or service provided. The tax invoice serves as proof that a seller has submitted VAT (and sales tax if applicable) and it later serves as the basis for VAT reporting.
A tax invoice must contain the following information:
- The seller’s name, address and tax number;
- The buyer’s name, address and tax number;
- Serial number and code of a tax invoice;
- Date of issuance;
- Type of goods or service provided, quantity, sale price and any discounts provided;
- Serial number of the goods or services provided;
- VAT payable;
- Sales tax (if applicable); and
- Name and signature of the person authorized to sign the invoice.
Usage of Invalid Tax Invoices in Indonesia
An invalid tax invoice can be defined as:
- A tax invoice that has not been issued in accordance with an actual transaction; and/or
- A tax invoice that has been issued by a non-taxable entrepreneur.
Any taxpayer that has been identified as issuing an invalid tax invoice, may have its electronic certificate suspended by the Director General of Tax (DGT) and thereafter they will not be eligible to issue tax invoices. In order to determine if a tax invoice is valid in Indonesia, the tax authorities look at the following criteria:
- The identity documents of the taxpayer and/or the management;
- The existence, validity and properness of the profile of the taxpayer or manager;
- The existence and validity of the taxpayer’s business location; and
- The level of conformity of the taxpayer’s business activity.
In order to remove the suspension, the taxpayer is required to submit a clarification letter to the Director of Tax Intelligence within a period of 30 calendar days, from the date the suspension has been imposed. If a taxpayer fails to submit such a letter within those 30 days, it may result in the taxpayer’s electronic certificate being permanently revoked.
With international transactions becoming more, it is becoming increasingly essential for businesses to ensure their transactions are made efficiently and are fully compliant with local laws. INS Global allows enterprises who do not have an existing entity in Indonesia, to invoice their clients in the local currency. We are able to provide a link between you and your clients, to allow for fast, simple and organized transactions. Contact us today and let our experts assist your enterprise in making global transactions easier.