he government has issued a new regulation on the collection of Value Added Tax (VAT) for services of insurance agents . The new regulation is the Minister of Finance Regulation No. 67/PMK.O3/2022 on Value Added Tax for the Delivery of Insurance Agent Services, Brokerage Services and Reinsurance Brokerage Services. The regulation is expected to maximize tax revenue from sectors that are still not fully covered.
Insurance agent services are service activities by insurance agents in order to represent an insurance company or sharia insurance company to market insurance products or sharia insurance products. In contrast to insurance agent services, insurance brokerage services are consulting or intermediary service activities in closing insurance or sharia insurance and handling claims settlement by acting for and on behalf of the policyholder, the insured or the participant.
Apart from insurance brokerage services, there are other services by name of reinsurance brokerage services. Reinsurance brokerage services provide consulting or intermediary services in placing reinsurance and handling the settlement of reinsurance compensation by acting in the interests of insurance companies.
Article 2 of Minister of Finance Regulation No. 67/PMK.O3/2022 states that VAT is payable for 3 service delivery activities, namely:
- insurance agent services by insurance agents to insurance companies or sharia insurance companies.
- insurance brokerage services by insurance brokerage companies to insurance companies and or sharia insurance companies.
- reinsurance brokerage services by reinsurance brokerage companies to reinsurance companies and or sharia reinsurance companies.
The VAT payable is collected, deposited, and reported by the insurance company, sharia insurance company, reinsurance company or sharia reinsurance company appointed as VAT collector. VAT payable is collected and deposited with a certain amount.
Based on Article 3 paragraph 2, the amount of tax is collected and paid in a certain amount. Insurance agents are subject to VAT of 10 percent multiplied by a commission or reward in name and in whatever form that is paid to the insurance agent. Brokerage or reinsurance companies are subject to VAT of 20 percent multiplied by a commission or reward in any name and form received by the insurance or reinsurance brokerage company.
Meanwhile, Article 3 paragraph 3 stipulates that the VAT rate is 11 percent which will become effective April 1, 2022 and 12 percent which will come into effect when the VAT rate is applied in accordance to Article 7 paragraph 1 letter b of the Law No. 42/ 2009 on Value Added Tax.
Obligations of Insurance Agents, Insurance Brokerage Companies and Reinsurance Brokerage Companies
Article 4 of the Minister of Finance Regulation No. 67/PMK.O3/2022 stipulates obligations of insurance agents, insurance brokerage companies and reinsurance brokerage companies. This obligations include:
- insurance agents, insurance brokerage companies and reinsurance brokerage companies are required to report their business to the tax service office whose working area includes the place of residence or domicile and/or place of business activity to be confirmed as a taxable entrepreneur.
- the obligation of insurance agents, insurance brokerage companies and reinsurance brokerage companies to be confirmed as taxable entrepreneurs as referred to in paragraph (1) also applies to insurance agents, insurance brokerage companies and reinsurance brokerage companies that meet the criteria as small entrepreneurs in accordance with the provisions of the law – Legislation governing the VAT limit for small entrepreneurs.
- insurance agents who have a Taxpayer Identification Number (NPWP) are considered taxable entrepreneurs.
- insurance agents who do not yet have an NPWP are required to register with a tax service office whose working area includes a place of residence or domicile and/or place of business activity to get a taxpayer identification number.
- in the event that the insurance agent, in addition to providing insurance agent services, delivers taxable goods and/or other taxable services, the insurance agent is required to report his business activities to get a status as a taxable entrepreneur as long as the amount of his business circulation exceeds the small entrepreneur limit in accordance with the applicable laws and regulations in taxation sector.
- insurance brokerage companies and reinsurance brokerage companies as referred to in paragraph 1 are confirmed as taxable entrepreneurs in accordance with the provisions of the laws and regulations in the field of taxation.