This Law Regulates the collection of Value Added Tax (VAT) anda Sales Tax on Luxury Goods. VAT is a tax over a transaction of business entity activities. The procedures of calculation is based on additional value, which is in practice is implemented based on Indirect Subraction Method. In order to implement the Indirect Subtraction Method, the Law has arranged the terms of Tax Invoice, determined the time of tax invoice is made, terms of VAT-In is credited, and when VAT is Payable, etc. Tax to be paid for a certain period is calculated from the tax on the delivery of taxable goods or services (VAT-Out) deducted by tax on purchasing, production, and operation (VAT-In).
Other principles in the Law, namely destination principle, consumption tax, single rate, multiple steps, accrual basis, and broad based tax.
Multiple and broad based tax can not be fully applied because there is still strategic goods and there is certain transaction, which the tax is imposed by Regional Authority, such as hotel, restaurant, parking, advertising, billboard, catering, etc. Based on the double tax principle then Value Added Tax is exempted. Consequently, VAT-In related to those transactions becomes expenses for the compny and cannot be deducted as VAT-In to other transactions.
In Contrast to Value Added Tax, Sales tax on Luxury Goods is only charged once (single step), but Destination Principle is still be applied, which means export is not Sales Tax, however the refund on the Sales Tax on Luxury Goods as part of exported goods, which arleady [aid should be done through a reguest.
