Indirect Tax News - January 2023

VAT exemption for mining and drilling activities clarified

On 12 December 2022, Indonesia’s government issued an implementing regulation (No. 49 Year 2022) to the VAT section of the 2021 Tax Harmonisation Law (UU HPP) that provides clarifying details and guidance on the VAT exemption for the mining and drilling industry. The salient points of the regulation, which applies as from the date of issuance, are as follows:

  • The general article in the VAT Law (No. 42 Year 2009) on the VAT exemption for mining and drilling is revoked by the UU HPP; instead, the regulation clarifies the type of business activities that are exempt from the 11% Indonesian VAT.
  • The import and delivery of the following strategic products used for mining and drilling activities, other than coal mining activities, are exempt from VAT:
    • Crude oil;
    • Natural gas (excluding natural gas ready for public consumption);
    • Geothermal energy;
    • Asbestos, slate, gemstones and semi-gemstones, limestone, pumice, bentonite, dolomite, feldspar, rock salt (halite), graphite, granite/andesite, gypsum, calcite, kaolinite, leucite, magnesite, mica, marble, nitrate, obsidian, ochre, sand and gravel, quartz sand, perlite, phosphate, talc, fullers earth, diatomaceous earth, clay, alum, pozzolan, jarosite, zeolite, basalt, trachyte, and sulphur, with limits and criteria to be further regulated by Ministry Regulation;
    • Iron ore, tin ore, gold ore, copper ore, nickel ore, silver ore, and bauxite ore; and
    • Liquified natural gas and compressed natural gas.
  • Input tax arising from the following transactions may not be claimed as a credit with respect to the VAT-exempt products listed above:
    • The acquisition of taxable goods and/or services;
    • The import of taxable goods and the use of intangible taxable goods from outside the Indonesian customs area into the Indonesian customs area; and/or
    • The utilization of taxable services from outside the Indonesian customs area.

Irwan Kusumanto

Suwenny Leonardi