Indonesia and e-Faktur
As of 1 July 2015, the Indonesian government has made it mandatory for companies to use e-invoices. Indonesia was unable to establish a stable tax infrastructure due to many reasons such as high tax returns, spurious bills. With the widespread use of e-invoices, the first step of a stable tax system takes.
Invoice is all-important to buyers as it serves as proof that VAT pays in Indonesia. If a tax invoice is not issued, the tax administration can impose sanctions. There are various types of invoices issued in this manner.
Simple Tax Invoice
A simple tax invoice can be issued for basic transactions. It has no prescribed layout and does not need to be numbered like a standard tax invoice. A simple tax invoice cannot be issued to reduce liability, as the seller must include it in the VAT reports.
Standard Tax Invoice in Indonesia
In Indonesia, commercial invoices must be accompanied by a tax invoice. While the tax invoice displays tax information, an invoice contains more detailed information about the goods sold or services provided. The tax invoice serves as proof that a seller has submitted VAT (and sales tax, if applicable) and serves as the basis for subsequent VAT reporting.
Use of Invalid Tax Invoices in Indonesia
An invalid tax invoice can be defined as follows:
- A tax invoice not issued according to an actual transaction,
- A tax invoice issued by a non-taxable entrepreneur.
Tax General Manager (DGT) may suspend the e-certificate of the taxpayer found to have issued an invalid tax invoice. Thus, the taxpayer will not have the right to issue a tax invoice.
Determining whether a tax invoice is valid in Indonesia, tax authorities look at the following criteria:
- Identity documents of the taxpayer or administration
- Existence, validity, and suitability of the taxpayer profile
- Existence and validity of the taxpayer’s workplace
- Compliance level of the taxpayer’s business activity
For the suspension to lift, the taxpayer must submit a letter of explanation to the Tax Intelligence Manager within 30 calendar days from the date the delay makes. If a taxpayer fails to send such a letter within these 30 days, this could result in permanent revocation of the taxpayer’s electronic certificate.
What is an E-Faktur?
The e-tax invoice or e-Faktur system is a Faktur Pajak creation system that has been approved by the Tax Office (and stored in its systems) and includes an integrated VAT refund.
On the other hand, the e-Faktur signs electronically by the DGT by the taxpayer. The physical tax invoice is prepared in paper form and signed by the taxpayer. It is reported in VAT Declaration together with tax invoices received from E-Factor system.
Application of E-Faktur
First of all, a VAT payer must obtain e-certificate to be able to use e-Faktur. The e-certificate is required for the VAT payer to request an online Tax Invoice serial number and issue an e-Factor. For this, he/she must register electronically for the relevant Tax Office. When the taxpayer accepts the terms and conditions stipulated by DGT, an e-certificate will be issued.