The use of “Other Value” for the VAT imposition base is stipulated under Article 8A of the VAT Law. Three of the new MoF Regulations cover this aspect for certain Liquefied Petroleum Gas (“LPG”) products, tobacco products, and subsidized fertilizer for the agriculture sector.
A. Certain LPG Products
MoF Regulation No. 62/PMK.03/2022 (“PMK-62”) updates the VAT calculation method for non-subsidized LPG products. VAT on the delivery of subsidized LPG products was introduced in MoF regulation No.220/PMK.03/2020 (“PMK-220”). The PMK-62 provisions on any subsidized portion (i.e. with VAT borne by the Government) and any non-subsidized portion (i.e. with VAT paid by the customer), VAT compliance, and Input VAT crediting remain as per PMK-220.
The use of “Other Value” for the VAT imposition base applies at the point of delivery by a Government-appointed entity. The “Final” VAT, however, applies at the point of delivery by a distribution agent or a sub-distribution agent.
“Other Value” for the VAT imposition base
For deliveries by a Government-appointed entity the “Other Value” for the VAT imposition base is 100/(100+t) of the retail selling price. This is where ‘t’ is the MoF Regulation prevailing VAT rate. The VAT payable is calculated by multiplying the VAT rate by the “Other Value”.
Final VAT
The general VAT rate is multiplied by the designated percentage resulting in an effective Final VAT rate. The Final VAT rates are:
a) 1/101.1 (starting 1 April 2022); and
b) 2/101.2 (starting once the 12% VAT rate is applicable).
This is multiplied by the margin of the distribution agent or sub-distribution agent (i.e. the margin is deemed to be the VAT base).
Input VAT credit
The Input VAT crediting rules remain the same. Input VAT related to deliveries by a Government-appointed entity can be credited whilst the Input VAT related to deliveries by a distribution agent or a sub-distribution agent cannot be credited.
B. Tobacco products
MoF Regulation No. 63/PMK.03/2022 (“PMK-63”) updates the VAT rate used to calculate the VAT payable on tobacco products as well as adding other provisions.
VAT on the delivery of tobacco products was introduced in MoF Regulation No. 174/PMK.03/2015 (“PMK-174”). The PMK-63 provisions on VAT compliance and Input VAT crediting remain as per PMK-174.
“Other Value” for the VAT imposition base
For deliveries by producers/importers, the “Other Value” for the VAT imposition base is 100/(100+t) of the retail selling price. This is where ‘t’ is the prevailing VAT rate. The VAT payable is calculated by multiplying the VAT rate by the “Other Value”.
PMK-63 stipulates that based on the applicable VAT rate and the “Other Value”, VAT on the delivery of tobacco products is rounded to be payable at:
a) 9% of the retail selling price for deliveries starting 1 April 2022; and
b) 7% of the retail selling price for deliveries starting when the 12% VAT rate is applicable.
Other provisions include:
a) that VAT is only collected at the producer/importer level upon the delivery of tobacco products;
b) those distributors who deliver to other distributors, or final consumers, do not need to collect and pay the VAT;
c) that distributors who only deliver tobacco products do not need to be appointed as PKPs.
Input VAT credit
The Input VAT crediting rules remain the same. Input VAT related to deliveries by producers/importers can be credited whilst Input VAT related to deliveries by distributors cannot be credited.
C. Subsidized fertilizer for the agriculture sectors
MoF Regulation No.66/PMK.03/2022 (“PMK-66”) updates the VAT imposition base on subsidized fertilizer and adds other provisions. VAT on the delivery of subsidized fertilizers was introduced in MoF Regulation No.62/PMK-03/2015 (“PMK-62/2015”).
VAT on the delivery of subsidized fertilizers is calculated by multiplying the VAT rate with the “Other Value” (for the VAT imposition base).
“Other Value” for the VAT imposition base
“Other Value” for fertilizers is:
a) the subsidized portion calculated under the formula 100/(100+t) multiplied by the amount of the subsidy payment (VAT included); and
b) the non-subsidized portion calculated under the formula 100/(100+t) multiplied by the highest retail price.
This is where ‘t’ is the applicable VAT rate.
Other provisions
These include:
a) that VAT is only collected by producers upon delivery of subsidized fertilizers;
b) that distributors who deliver to retailers or retailers who deliver to farmers do not need to collect and pay the VAT;
c) that distributors and retailers who only deliver subsidized fertilizers do not need to be appointed as PKPs.
Input VAT credit
The Input VAT crediting rules remain the same. Input VAT related to deliveries by producers can be credited whilst Input VAT related to deliveries by distributors and retailers cannot be credited.
