Entity Setup
Entity Setup and VAT Compliance for Foreign Businesses in Indonesia
Foreign businesses entering Indonesia must understand recent updates like PER-10/PJ compliance, exchange rate adjustments, and how VAT input credit works to avoid exposure.
By NomadicTax Research Team • 5-8 min read • August 24, 2026
## Overview of Key Regulatory Updates
Within the past month, Indonesia’s tax authorities have issued several notices via Direktorat Jenderal Pajak (DJP) that are important for foreign entities and others engaged in cross-border VAT, customs, and income tax compliance. ([pajak.go.id](https://pajak.go.id/?utm_source=openai))
### 🔍 Important Changes
- **Keputusan Menteri Keuangan 34/MK/EF.2/2026**: Sets the exchange rates used for imports, VAT, luxury goods sales tax (PPnBM), export duties, and income tax repayment for the period **29 July to 4 August 2026**. ([pajak.go.id](https://pajak.go.id/?utm_source=openai))
- **PER-8/PJ/2026**: Amendment to Director-General Rule PER-10/PJ/2024, covering payment, deposit, and refund processes in the context of the new core tax administration system. ([pajak.go.id](https://pajak.go.id/?utm_source=openai))
- Expired or delayed provisions for marketplace withholding tax PPh Pasal 22 have been postponed as per DJP announcements. ([pajak.go.id](https://www.pajak.go.id/pengumuman-page/?utm_source=openai))
## Setting Up Presence: Entity & Compliance Steps
| Step | What Foreign Entity Must Check |
|------|-------------------------------|
| 1. **Registration** | Ensure registration under Indonesia’s tax system—secure NPWP (tax ID) for company or representative office. |
| 2. **Payment Currency** | When importing or receiving taxable income, apply official DJP exchange rates in effect to calculate VAT, duties, and taxable income. ([pajak.go.id](https://pajak.go.id/?utm_source=openai)) |
| 3. **VAT Input Credit Conditions** | For enterprises purchasing goods or services on credit, where payment isn’t made immediately—as long as invoice, contract, and non-cash payment proof are in order, input VAT may be claimed. Some contract cases require adjustment if payment documentation is delayed. |
| 4. **Marketplace Withholding Tax** | Be aware: implementation of marketplace withholding under PPh Article 22 has been delayed. Foreign platforms or sellers should monitor when obligations kick in. ([pajak.go.id](https://www.pajak.go.id/pengumuman-page/?utm_source=openai)) |
## Actionable Compliance Advice
- Use the DJP’s official exchange rate notifications to price imports or calculate input VAT correctly—misapplication may lead to under-volŽations and fines.
- Retain contracts, invoices, proof of non-cash payments, even for installments—support VAT deduction eligibility.
- Clarify marketplace status and tax withholding obligations: platforms may be required to act as withholding agents when policy becomes effective.
- Use the new core tax administration (Sistem Inti Administrasi Perpajakan) tools accurately for regular filings, payments, refunds.
## Case Example
A foreign SaaS provider bills a customer in Jakarta for USD payments spread over 12 months. Under current regulations, if invoice value is above certain thresholds or payments delayed, it must ensure **non-cash payment proof** and contracts are aligned. Should maintain documentation as per the amended VAT input regulations. Meanwhile, for any import of software via customs, apply exchange rate per Keputusan 34/MK/EF.2/2026.
## Conclusion
Foreign businesses in Indonesia must adapt quickly to the exchange-rate windows, amended tax deposit/payment rules, and evolving withholding requirements. Following the updated regulations closely when setting up and operating will prevent compliance risk and financial exposure.