Differences Between Restaurant Tax & VAT Explained by the DGT

BATAM, DDTCNews - Through its vertical unit, the Directorate General of Taxes (DGT) seeks to increase taxpayers’ understanding of taxation issues. One of the issues that frequently lead to misunderstanding is the imposition of Value Added Tax (VAT) and the collection of restaurant tax. The two are sometimes considered the same.

In response to this condition, Batam Medium Taxpayer Office held an online tax class discussing the differences between the two types of taxes. Provisions related to the imposition of VAT are specifically regulated under MoF Reg. 70/2022 concerning the Criteria and/or Details of Food and Beverages, Arts and.

“To date, people have assumed that restaurant tax and VAT are the same taxes, thereby, have the same rates. The two types of taxes are, in fact, different and the objects of local taxes and local levies include the types of taxes that are not subject to VAT,” said Functional Tax Instructor of Batam Medium Taxpayer Office Chairul Budi Prabowo as reported by pajak.go.id, Thursday (7/7/2022).

Chairul explained that the VAT rate is regulated through Law 7/2021 concerning the Harmonisation of Tax Regulations. The amount, 11% is valid as of 1 April 2022. Meanwhile, the restaurant tax rate is regulated through local regulations by each local government in Indonesia.

Batam City, for example, through Regional Regulation 5/2011 stipulates the amount of restaurant tax rate of 10%. The figure is indeed the same as the VAT rate before the change under the Harmonisation of Tax Regulations Law.

“Thus, pay attention if a restaurant charges a rate above 10%, please confirm,” Chairul said.

On another note, Article 4A paragraph (2) of the Harmonisation of Tax Regulations Law states the types of goods not subject to VAT, namely certain goods, including food and beverages served in hotels, restaurants, eateries, food stalls and the like.

This is because these goods constitute objects of local taxes and local charges pursuant to the Local Taxes and Local Charges Law as amended by the Law concerning Financial Relations Between the Central Government and Local Governments.

The Financial Relations Between the Central Government and Local Governments Law subsequently incorporates food in restaurants into the group of Taxes on Certain Goods and Services. The collection of these types of taxes is the authority of local governments at the regency/municipality level.

Certain goods excluded from Taxes on Certain Goods and Services are supplies of food and/or beverages with business turnover not exceeding a certain threshold stipulated under a regional regulation; carried out by supermarkets and the like that do not solely sell food and/or beverages; carried out by factories of food and/or beverages; or provided by facility providers whose main business is to provide lounge services at airports. (sap)