• Murabahah Transactions For Sharia Banking Are Free Of Value Added Tax (Vat)

• 14 February 2011 by admin 1 Comments

The Ministry of Finance of the Republic of Indonesia has issued a Regulation of the Minister of Finance No. 251/PMK.011/2010 concerning Value Added Tax on Murabahah Transactions for Sharia Banking To Be Borne by The Government for the Budget Year 2010, which came into effect on 28 December 2010 (“Permenkeu 251”). All murabahah transactions which occurred before 1 April 2010 are still subject to VAT, but the VAT will be borne by the Government.

Murabahah transactions are the sales of goods at a price covering the purchase price plus a profit margin agreed upon by both of the parties concerned. It is an agreement that finances an asset or project throughout a sale and purchase transaction, whereby the costs and profit margin (mark-up) are made known and agreed by all parties involved. It transforms a traditional lending activity into a sale and purchase agreement under which the lender buys raw materials, goods or equipment required by the borrower for resale to the borrower at a higher price agreed upon by both parties.

Permenkeu 251 basically stipulates the following: (a) the Government will bear the VAT for any murabahah transaction for sharia banking that occurred before 1 April 2010 in accordance with the prevailing tax regulations according to the Notice of Tax Assessment (Surat Ketetapan Pajak) issued; (b) the Government has set a budget for this VAT in the amount of Rp. 328,454,138,718 allocated from the State Budget (APBN) for Year 2010 and its amendments; (c) a sharia bank taxpayer which has already paid the Notice of Tax Assessment on a murabahah transaction can be given a tax refund in accordance with the prevailing tax regulations; and (d) the administration procedures for this VAT shall be further governed by a Regulation of Director General of Budgeting, Director General of Taxation, and Director General for Treasury, either jointly or severally.

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  Banking & Financial service , Sharia Transactions

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