e-Faktur Pajak: Electronic Invoicing in Indonesia

The adoption of Indonesia's electronic invoicing system, known as e-Faktur, marks a significant shift in the country’s taxation and billing framework. Managed by the Directorate General of Taxes (DJP), this system aims to enhance transparency, improve efficiency, and ensure compliance in tax reporting.

In July 2024, the government announced the development of a Core Tax System (Pembaruan Sistem Inti Administrasi Perpajakan, or PSIAP) to automate and digitize tax administration services. This system will enable taxpayers to access services independently, automatically complete tax return forms, and prioritize transparency for taxpayers.

What is e-Faktur?

e-Faktur is an electronic invoicing system designed to streamline the declaration of Value-Added Tax (VAT) in Indonesia. This system applies to all businesses classified as VAT-Registered Persons (Pengusaha Kena Pajak, PKP).

Under this system, taxpayers issue invoices digitally, automatically integrating them into the tax reporting infrastructure. This ensures that the VAT components of transactions are accurately tracked and reported.

e-Faktur Pajak is the application used to generate electronic tax invoices or VAT payment receipts.

Implementation Timeline

The e-Faktur system was rolled out in phases:

• 2015: e-Faktur became mandatory for high-revenue businesses classified as VAT-Registered Persons (Pengusaha Kena Pajak, PKP).
• 2016-2020: All taxpayers with annual sales exceeding 4.7 billion IDR (approximately 333,000 USD) were required to issue VAT invoices electronically. The system was expanded to include smaller businesses and other taxpayer categories.
• 2021 and beyond: The government introduced updates to enhance user experience and security, including integrations with other financial systems.

When is an electronic invoice created?

Electronic invoices, or tax invoices, are generally issued in the following instances:

1. Rendering of Taxable Services (Jasa Kena Pajak): When taxable services are provided.
2. Delivery of Taxable Goods (Barang Kena Pajak): When taxable goods are delivered.
3. Advance Payment for Taxable Goods or Services: When payments are received for goods or services subject to tax before delivery.
4. For Payments or Deliveries Linked to Project Milestones: When payments or deliveries occur as part of a defined project phase.

CTC (Clearance) Model for e-Faktur Electronic Invoice Validation

The e-Faktur system is designed to ensure efficiency and accuracy in the issuance and validation of VAT invoices.

Steps for the Issuance and Validation of Invoices:

Taxpayer Registration

Taxpayers must first register with the Tax Directorate to obtain an electronic certificate, enabling them to upload sales invoices. They also need to request a sequence of invoice numbers for their batch.

Invoice Generation

Businesses create invoices using the e-Faktur application provided by the Directorate General of Taxes. The tax authority assigns Fiscal Invoice Serial Numbers (NSFP) to each invoice, which are crucial for the validity of each invoice.

Required Invoice Information

Each invoice must include:

• Buyer and Seller Details: Names, tax identification numbers, and addresses involved.
• Transaction Details: Description of the goods or services, quantity, and price.
• VAT Amount: The total VAT charged.

Submission for Validation

Invoices are electronically submitted to the e-Faktur system for validation. The system verifies:

• Adherence to the required format.
• Accuracy of tax calculations.

QR Code Assignment

Once validated, the system assigns:

• A QR Code: This serves as proof of validation by the Directorate General of Taxes (DJP), capturing over 16 fields of invoice data verified by DJP.

Storage and Reporting

The validated invoice is electronically stored and automatically integrated into the company's VAT return for the corresponding tax period.

Types of Electronic Tax Invoices (e-Tax Invoices)

Electronic tax invoices are categorized into several types:

1. Input Tax Invoice: Used by buyers from taxable businesses to claim the VAT paid, serving as proof of VAT charged.
2. Output Tax Invoice: Issued by taxable businesses when selling taxable goods or services, used to calculate the applicable VAT.
3. Credit and Debit Notes (Output Tax Return): Adjustments to previously issued tax invoices.
4. Other AR Documents: Documents related to incoming taxable transactions.
5. Other AP Documents: Documents related to outgoing taxable transactions.

Invoice Corrections

In Indonesia, businesses using the e-Faktur system can correct errors in submitted electronic invoices, ensuring accurate records and compliance with the Directorate General of Taxes (DJP). The main methods for correcting invoices are as follows:

• Issuance of a Credit Note (Nota Retur): If the submitted electronic invoice contains minor errors, such as inaccuracies in the amount, tax rate, or item descriptions, a credit note is issued. This document revises the original invoice value, rectifying overcharges or other potential inaccuracies. The credit note references the original invoice, aligning both records in the e-Faktur system to facilitate VAT reporting.
• Creation of a Replacement Invoice (Faktur Pengganti): For more substantial errors, where the original electronic invoice needs to be completely replaced, a replacement invoice is created. This new invoice, linked to the initial record, includes all corrected details to ensure proper documentation of the changes. The e-Faktur system retains both the original and replacement invoices, providing full traceability for audits.

EDICOM Global Compliance

With the mandatory implementation of electronic invoicing, the need for reliable, scalable, and regulatory-compliant solutions has become more critical than ever.

EDICOM's Global Compliance Platform stands out as a fully comprehensive solution for businesses facing the challenges of electronic invoicing in Indonesia and the broader Asia-Pacific (APAC) region. Designed to ensure seamless integration and compliance with local tax regulations, this platform offers key advantages for companies looking to optimize their electronic invoicing processes:

1. Regulatory Compliance: EDICOM’s platform is continuously updated to comply with the evolving electronic invoicing regulations in Indonesia, including requirements set by the Directorate General of Taxes (DJP). It ensures compliance with invoice formats, digital signatures, and secure data transmission.
2. Integration with Local Systems: EDICOM provides tailored solutions that integrate smoothly with existing ERP systems, enabling a seamless transition to electronic invoicing without disrupting daily operations.
3. Coverage Across the APAC Region: Beyond Indonesia, EDICOM’s Global Compliance Platform is equipped to manage various electronic invoicing mandates across the entire APAC region, from Singapore to Australia. This makes it an ideal solution for multinational companies operating across different jurisdictions.

For businesses operating in Indonesia or planning to expand in the APAC region, EDICOM's Global Compliance Platform offers the efficiency, reliability, and peace of mind needed to thrive in an ever-evolving regulatory landscape. By automating and optimizing electronic invoicing processes, EDICOM empowers your organization to stay ahead of compliance requirements while focusing on strategic growth.