Indonesia Simplifies Conditions to VAT Refund for Tourists

Indonesia, shopping, VAT refund

Small shops such as this one in Medan could now join Indonesia VAT refund scheme

Although VAT refund in Indonesia can be considered a success since its introduction in 2016, the Indonesian government wants to make shopping in the country even more attractive by further relaxing rules for travellers. From now, cumulating receipts is possible to reach the minimum amount of IDR500,000 (US$35).

Since the end of August, tourists coming into Indonesia will find shopping even more attractive as VAT refund has been further simplified. Until last month, foreign visitors to Indonesia could claim VAT back for a purchase of at least IDR500,000 (US$35) per receipt. VAT is refund once the total reached IDR 5,000,000 (US$350).

However, a finance ministerial regulation issued on 23 August allows tourists to request a VAT refund by cumulating multiple receipts of purchase equivalent to at least a minimal amount of IDR500,000 (US$35). Each of the receipts must show a VAT value of at least IDR50,000 (US$3.50) in transaction value. The fact that VAT can be claimed from a sum as low as US$3.50 makes duty-free shopping in Indonesia one of the most attractive in the world. They are no other countries within ASEAN which currently accept such a minimal amount for VAT refund. Purchases of food, services, medicines or tobacco in shops are however not included in the scheme.

“With the implementation of this regulation, international tourists are able to collect their purchase receipts with a minimum value of IDR500,000 each from several days at various shops, and after the transaction amount has reached IDR5 million, they can ask for a VAT refund,” states a press release issued by the Taxation Directorate General .

In order to claim the VAT refund, tourists have to present their passport, boarding pass and receipts issued by participating shops at VAT refund counters located at five international airports: Jakarta Soekarno-Hatta International Airport; Medan Kualanamu International Airport; Yogyakarta Adisucipto International Airport; Surabaya Juanda International Airport and Denpasar Ngurah Rai International Airport in Bali. The government is not looking at adding more international airports into the scheme in the short term. according to the Taxation Directorate General.

The Indonesian government believes that the measure will further encourage tourists to come to the country for shopping. It also wants to encourage small and medium enterprises to join the tax refund program. So far, only 55 corporations are part of the scheme, translating into 500 retail stores across the country.

in 2018, the tax office refunded VAT to tourists for a total of IDR11.2 billion (US$787,000), a relatively low amount compared to other countries in the region. It was however up from IDR6.4 billion (US$450,000) in 2017, a growth of 75%. For the first six months of this year, VAT refund reached already IDR6.2 billion (US$435,000).