Buy Auction Collateral Goods Subject to 1.1 Percent VAT starting May 1, 2023


Sale of goods collateral by the lender (creditor) to the buyer will be charged tax value added (VAT) of 1.1 percent. This rule applies from May 1, 2023.

Collateral is an additional guarantee in the form of goods handed over by the debtor to the creditor in the context of granting credit. If the collateral is withdrawn by the lender and then sold through an auction or outside the auction, then the collateral becomes a taxable item.

This provision is regulated in Minister of Finance Regulation (PMK) Number 41 of 2023 concerning VAT on the Submission of Collateral Taken Over by Creditors to Collateral Buyers, which was signed by Minister of Finance Sri Mulyani on April 13.

In this regulation, the amount of VAT collected is calculated using a certain amount of 10 percent of the current VAT rate (11 percent) so that 1.1 percent is obtained. Then, multiplied by the selling price of the collateral.

“A certain amount as referred to in paragraph (3) is set at 10 percent (ten percent) of the rate as stipulated in Article 7 paragraph (1) of the Law on Value Added Tax multiplied by the tax base in the form of selling price of Collateral,” reads Article 4 PMK was quoted on Wednesday (26/4).

VAT payable upon submission of collateral is then collected, deposited, and reported by the creditor. VAT collection is carried out when the creditor receives payment from the collateral buyer upon the delivery of the collateral.

Creditors who are taxable entrepreneurs in accordance with the provisions of laws and regulations in the field of taxation, are required to make tax invoices for the delivery of Taxable Goods in the form of collateral. While the takeover of collateral by the creditor from the debtor is not issued a tax invoice.

The creditor is then required to deposit the collected VAT by using a tax deposit letter and/or other administrative means that is the same as a letter
tax deposit.

“The deposit of Value Added Tax as referred to in paragraph (1) must be made no later than the end of the following month after the end of the tax period and before the Notice of Period of Value Added Tax is submitted,” Article 6 paragraph (3) reads.

The examples of VAT collection, deposit and reporting on the delivery of collateral taken by creditors are as follows:

Bank A provides credit to Oscar with collateral in the form of land and buildings. Oscar was later declared in default by Bank A. On 1 July 2023, the collateral was successfully sold to Adhi for IDR 1 billion.

Bank A as a Taxable Entrepreneur is then required to collect VAT on the sale of collateral to Adhi on 1 July 2023. The amount of VAT collected is 10 percent times the current VAT (11 percent) times IDR 1 billion. So that the VAT collected was Rp. 11 million.

Bank A then deposited the IDR 11 million VAT using a tax deposit letter no later than August 31, 2023.

[Gambas:Video CNN]



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