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Indonesia: The importance of tax invoice

Tax invoice is one of the most important documents that must be issued by any enterprise that is required by law to collect VAT when they sell VAT-taxable goods or services.

For the buyer, the tax invoice is evidence that the liable VAT has been paid. When a VAT taxable enterprise fails to issue a tax invoice, the tax office may impose a sanction of 2% of the VAT tax base.

A seller usually issues a tax invoice to a buyer who directly receives goods. However, due to the complexity of cross-border trade, foreign enterprises can provides local enterprises with goods acquired from other local enterprises. It is also common that a local enterprise can provide other local enterprises with goods acquired from another foreign enterprise.

Below are some complexities of tax invoice issuance that need to be addressed in cross-border transactions.

Example one

Company A and company B are Indonesian. Company C is in the.

C purchases goods from A and sells them to B.

C asks A to deliver the goods directly to B.


The selling of goods by company A to company C is treated as an export transaction that is subject to VAT of 0%. Since company A delivers the goods directly to company B, it is a transfer within the Indonesian customs area, which is subject to VAT of 10%. Therefore company A is obliged to issue a tax invoice to company B. If company B intends to use the invoice as a tax credit, it must prove that the goods are provided domestically.

Example two

Company A, in Indonesia, sells goods to company C in the US.

Company B, a producer in Indonesia, sells goods to company A who is instructed to export the goods to company C.


The sales of company B may be interpreted as export or local sales. The goods delivered to company C may be treated as export and subject to VAT of 0% and company B will record domestic sales to company A.

No tax invoice will be issued by company B, except the export notification. In this case, company B may face challenges from the tax office to prove it is an export transaction rather than a local sale.

The sales of company B may be treated as local sales to company A and company B must issue a tax invoice and collect VAT of 10%.

Subsequently, company A will export the goods directly from company B’s inventory, subject to VAT of 0%.

In this case, a liquidity issue arises because company A will recover the paid VAT at the end of the fiscal year. However, the tax office will not challenge company A and company B, regarding the implementation of the VAT law.

The issuance of a tax invoice to an enterprise that is different to the buyer stated in a commercial invoice must be managed, in order to prevent an unnecessary tax penalty imposed by the tax office.

Novilia (

PB Taxand


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