The Indonesian Ministry of Finance has issued Regulation No. 157 of 2023 regarding the value-added tax (VAT) exemption for imports related to defense and security matters.
The regulation, effective from January 1, 2024, grants VAT exemptions for the Ministry of Defense’s imports, covering a range of defense equipment such as primary weapon systems, including weapons, bulletproof vests, ammunition, specialized land vehicles, and radars.
It outlines the procedures for exempting VAT on the import or delivery of specific strategic taxable goods within the customs area and the utilization from outside the customs area. This regulation is a follow-up to Government Regulation No. 49 of 2022 also on VAT exemptions.
Dwi Astuti, Director of Dissemination, Services, and Public Relations at the Directorate General of Taxes, said Regulation No. 157/2023 provides legal certainty and improves service delivery for the VAT exemption facility for strategically important taxable goods and services for defense and security purposes.
“Through the issuance of this regulation, the Directorate General of Taxes seeks to eliminate disputes in the field related to the criteria for the exemption of strategic taxable goods and services for defense and national security purposes,” said Dwi.
The regulation establishes criteria for specific taxable goods (BKP) and taxable services (JKP) that are strategically important, including weapons, ammunition, bulletproof helmets and jackets/vests, specialized land vehicles, and radars, as detailed in Annex I, an integral part of the regulation. The provision of VAT exemption is facilitated through a mechanism involving a Letter of Exemption (Surat Keterangan Bebas or SKB).
“Taxpayers can obtain an SKB by meeting compliance requirements and providing complete documents and information,” added Dwi.
The regulation also addresses the authority of the Directorate General of Taxes to oversee the utilization of VAT exemption facilities not covered by previous regulations. This includes procedures for replacement and cancellation of SKB, as well as the imposition of sanctions.
Dwi further emphasized that the service for providing VAT exemption facilities for strategically important defense and security taxable goods is expected to be more accessible as it now utilizes electronic channels. This shift to electronic services aims to build a governance framework for VAT exemptions in line with the principles of trust and verify.
With the issuance of this new regulation, the provisions of the Minister of Finance Decree No. 370 of 2003 concerning the Implementation of Value Added Tax Exemptions on Certain Taxable Goods Imports and/or Deliveries, and/or Deliveries of Certain Taxable Services Exempt from Value Added Tax are officially revoked. However, SKB issued based on Decree No. 370/2003 remains valid until it is utilized.
