Indonesia’s CTC System is Maturing

Coskun Antal
January 31, 2021

This blog was last updated on February 2, 2021

E-invoice, locally known as e-Faktur was the Indonesian tax administration’s breakthrough reform in the field of tax control. It was introduced in 2014 and became effective nationally in July 2016.

Indonesia previously experienced challenges in its tax control system, mainly due to fictitious invoices that caused a large tax gap, with a negative impact to the total Indonesian VAT revenue. To help solve this problem, Indonesia implemented a clearance e-invoicing system, where all issued invoices must be approved by the tax authority before being sent to the customer.

A closer look at the e-invoicing flow

The Director General of Taxation (DGT) established different methods for e-invoice creation, including client desktop applications, web-based applications, and host-to-host applications.

However, companies need to perform several steps before they can begin using e-invoicing. The first of these requires obtaining an electronic certificate containing the taxpayer’s identity for the purpose of creating a digital signature. Electronic certificates are valid for two years from the time of issuance. Taxpayers also need to obtain an activation code and password to access an application, referred to as e-Nofa, to request the electronic tax invoice serial numbers (NSFP) that are required on invoices.

After completing these requirements, the taxpayer must issue all tax invoices in the e-Faktur system so that invoices can receive a QR code and be approved by the DGT online. The supplier may only send the invoice to the customer after the invoice has been approved. After this procedure, taxpayers should use their e-Faktur applications to prepare their periodic VAT return (SPT), which is usually submitted on a monthly basis.

On the buyer side, the e-Faktur that the buyer receives should be validated through the VAT input feature in the e-Faktur application or by scanning the QR code as printed on the e-Faktur.

Continuous transaction control (CTC) system maturing

The DGT released the new e-Faktur version 3.0 on 1 October 2020. In this application there are several new features available, including pre-populated input taxes and a pre-populated tax return for the period of VAT.

This development follows examples seen in countries such as Chile and Italy, where an initial e-invoice clearance implementation has enabled the tax authorities to gain a greater understanding of the tax landscape and close tax gaps. Instead of taxpayers reporting their VAT balances on a periodic basis, as has been the norm in all countries with indirect tax, the tax authorities can leverage data reported in real-time to pre-populate tax returns.

In other words, the tax authority stops relying on data as reported in aggregate by taxpayers and instead delivers the reports to the taxpayers. If past clearance implementations in other countries can serve as inspiration of what is to come in Indonesia, it’s safe to say that the Indonesian CTC system won’t stop with pre-populated VAT returns but continue to evolve and mature by leveraging the data gathered to benefit both taxpayers and fiscal administration.

Take Action

Sovos has more than a decade of experience keeping clients up to date with e-invoicing mandates all over the world.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Coskun Antal

Coşkun is Regulatory Specialist at Sovos, based in Istanbul. Coşkun monitors and interprets both the regulations and associated technical specifications issued by tax authorities. He has a Bachelor’s degree in Electrical Engineering from Istanbul Technical University.
Share this post

Hungary Supplemental Insurance Premium Tax
EMEA IPT
July 11, 2022
Extra Profit Tax: An Introduction to Supplemental IPT in Hungary

This blog was last updated on October 28, 2024 Update 7 October 2024 by Edit Buliczka Hungarian Tax Office Updates IPT Declaration Form for 2023 The procedure necessary to correct an underdeclared premium figure in Hungary can be complicated. The complexity of a correction for return form 2320 has become even more challenging. Following a […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
New ViDA Proposal Set for ECOFIN Approval

This blog was last updated on November 1, 2024 The Council of the European Union has released a new proposal regarding the VAT in the Digital Age (ViDA) reform. The proposal aims to modernise and streamline VAT systems across the EU, notably e-invoicing and Continuous Transaction Controls (CTC). Members States will review it on 5 […]

what is peppol
E-Invoicing Compliance North America
October 29, 2024
What it is PEPPOL?

This blog was last updated on October 29, 2024 Peppol E-invoicing explained: What it is and how it works The global adoption of electronic invoicing is accelerating. Governments worldwide are pushing to adopt e-invoicing to digitally transform their national systems and, often, to close the VAT gap. While many countries have introduced their own e-invoicing […]

remote sellers sales tax
North America Sales & Use Tax
October 28, 2024
Will Congress Act to Simplify Remote Seller Sales Tax Collection

This blog was last updated on October 29, 2024 When the United States Supreme Court ruled in 2018, that South Dakota’s law imposing sales tax collection requirements on sellers without in-state physical presence was constitutional, it did not grant states free reign. States are still responsible for ensuring that their sales tax requirements are manageable, […]

dtc shipping laws for craft spirits
North America ShipCompliant
October 23, 2024
Why It’s Time to Reform DtC Shipping Laws for Craft Spirits

This blog was last updated on October 23, 2024 While wine lovers have enjoyed the convenience of direct-to-consumer (DtC) shipping for nearly two decades, the craft spirits market is still not afforded the same access. Outdated and restrictive spirits shipping laws have kept the spirits industry from fully leveraging the benefits of DtC shipping, leaving […]

reporting unclaimed property
North America Unclaimed Property
October 21, 2024
Three Key Reminders for Businesses Reporting Unclaimed Property

This blog was last updated on October 21, 2024 Unclaimed property compliance is one of those legal obligations that often flies under the radar for many businesses, especially smaller ones. However, failing to stay compliant can quickly turn minor oversights into major liabilities. In many cases, the penalties far exceed the value of the property […]