Transport and Logistics Working Group Meeting on Taxation

The Transport and Logistics Working Group met on 12 August 2019 to specifically discuss taxation issues for the logistics sector. This meeting is chaired by Mr. Sugyanto Halim, CFO of DB Schenker, as the Deputy Head of the Transport and Logistics Working Group. The first agenda is regarding proposals by EuroCham to revise policy on implementation of VAT and withholding tax in freight forwarding services. These proposals have been developed by the industry since 2015 and well communicated to the relevant government ministries/agencies. In regard to withholding tax proposals, there have not been significant development in terms of policy framework however the Directorate General of Tax is developing the electronic tax slip (e-bukti potong) program to help reduce the administrative burden.

Responding to the proposal on VAT, the Ministry of Finance recently issued Regulation No. 32/2019 that offers zero percent VAT for freight forwarding service on export-oriented goods (and not including the import side). The group overall welcome the latest zero percent VAT incentives, however there are still remining challenges to become eligible to enjoy the zero percent rate. To be eligible for the zero percent rate, companies need to provide written agreement of each international transactions, as well as provide proof of payment from the recipient of exported taxable services abroad which can be difficult due to most multinational forwarding companies implement a netting mechanism with their affiliated counterparts abroad.

Lastly the group also shared latest updates on proposals to reduce administrative burden due to duplication of tax and commercial invoices. Reportedly, even when a company is already directly exchanging data using a special host-to-host system with the DG Tax, there is still a remaining challenge to get some flexibilities from the DG Tax to adjust the automated DG Tax’s electronic tax invoice system so that it can be fully integrated with the commercial invoices.

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