JAKARTA (Reuters) – Indonesia has removed a requirement to pay value-added tax (VAT) on exported services such as software design and information technology security consulting in a bid to spur growth and cut the country’s trade deficit, the Finance Ministry said.
A ministry statement on Thursday said the new rules, in effect since March 29, extend the types of services free of VAT to communication, research and development, business consultation and international rental for ships and planes.
Earlier, Indonesia applied zero VAT only to contract manufacturing services, repair and maintenance services, as well as construction services for goods utilised or located outside its customs areas.
Normally, Indonesia applies a 10 percent VAT for the sales of goods and services domestically. It is not assessed on exported goods.
Indonesia’s current account deficit, which shows trade in goods and services, widened to $9.1 billion, or 3.57 percent of gross domestic product, in 2018’s final quarter – the highest in over four years. The services account suffered a $1.6 billion deficit.
Reporting by Maikel Jefriando and Tabita Diela; Editing by Ed Davies and Richard BorsukOur Standards:The Thomson Reuters Trust Principles.