Foreign-owned companies in Indonesia can issue invoices in US dollars (USD) for qualifying international transactions. Domestic transactions generally must be invoiced and settled in Indonesian rupiah (IDR), even when both companies are foreign-owned.
The applicable currency depends on the transaction rather than the nationality of the shareholders. Commercial invoicing, payment arrangements, and tax documentation may also be subject to different requirements.
When Can a Foreign-Owned Company Issue Invoices in USD?
Under Law No. 7 of 2011 on Currency and Bank Indonesia Regulation No. 17/3/PBI/2015, transactions conducted within Indonesia generally must use rupiah, whether settled in cash or through noncash payments.
For assistance with foreign-currency invoicing, email MAP Resources Indonesia at info@mapresourcesindonesia.com.
Exemptions include qualifying international trade transactions, certain international financing arrangements, foreign grants, and transactions specifically permitted under applicable regulations.
For example, an Indonesian PT PMA exporting manufactured products to a customer in Singapore may issue its commercial invoice in USD and receive payment in that currency. Qualifying cross-border services may also be invoiced in USD.
By contrast, a foreign-owned consulting company providing services to another PT PMA in Jakarta generally must invoice and receive payment in IDR. Foreign shareholding does not change the domestic nature of the transaction.
An overseas customer also does not automatically establish an exemption. The underlying supply must qualify under the applicable international trade requirements.
Can a PT PMA Quote Prices in USD but Issue Invoices in IDR?
Bank Indonesia’s rupiah requirements also restrict foreign-currency price quotations for transactions subject to mandatory rupiah use.
A PT PMA generally cannot avoid these restrictions by quoting a domestic service fee in USD and converting it into IDR when issuing the invoice.
For example, an Indonesian consulting company charging a domestic customer USD 5,000, with the final invoice converted into rupiah, may still violate the pricing requirements because the underlying fee was established in USD.
Companies with foreign-currency costs should instead establish compliant rupiah prices. Exchange-rate adjustment clauses require particular attention where they effectively link a domestic payment obligation to a USD-denominated amount.
For exempt transactions, USD quotations and invoicing may be permitted.
How Are USD Invoices Treated for Indonesian Tax Purposes?
A commercial invoice issued in USD does not automatically determine the currency used for Indonesian tax documentation or reporting.
VAT invoices and currency conversion
Where an Indonesian VAT invoice (faktur pajak) is required, the relevant taxable values and VAT amounts must be expressed in IDR using the applicable Ministry of Finance exchange rate.
For example, a taxable transaction invoiced at USD 10,000 must have its relevant tax values converted into IDR for VAT documentation.
Exporters may issue commercial invoices in USD while applying the separate VAT documentation requirements governing exports, including any applicable zero-rated treatment.
Accounting and corporate income tax reporting
Companies that keep their accounting records in IDR must convert USD transactions into rupiah. If the exchange rate changes between issuing an invoice and receiving payment, the company may record a foreign-exchange gain or loss.
Some foreign-owned companies may be permitted to maintain their tax records in English and USD, provided they meet the relevant requirements and obtain the necessary approval or submit the required notification.
Companies using USD for tax bookkeeping may also be required to pay certain corporate income taxes in USD. These include monthly corporate income tax installments, any remaining annual corporate income tax owed, and certain amounts assessed by the Indonesian tax authorities.
Other taxes may still need to be paid in IDR. Permission to maintain tax records in USD does not mean a company can use USD for domestic transactions that must be conducted in rupiah.
What Happens if a Company Issues USD Invoices Incorrectly?
Companies that violate Indonesia’s mandatory rupiah rules may face penalties, depending on the type of transaction.
For payments made through bank transfers or other noncash methods, penalties can include written warnings, fines of up to 1 percent of the transaction value, capped at IDR 1 billion (USD 62,500), and restrictions on certain payment activities.
Businesses that display prices in USD when rupiah is required may also receive written warnings. More serious consequences, including criminal penalties, may apply to violations involving cash payments.
MAP Resources Indonesia can assist with VAT documentation and foreign-currency accounting. Reach us at info@mapresourcesindonesia.com.
However, issuing an invoice in USD is not automatically a violation. The authorities will consider whether the transaction qualifies for an exemption.
Incorrect USD invoicing may also lead to payment disputes with customers. If the mistake affects tax reporting, the company may need to correct its invoices or tax records.
Manage USD Invoicing Compliance with MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with foreign-currency invoicing, accounting, VAT documentation, and tax reporting. Contact us at info@mapresourcesindonesia.com to discuss your company’s invoicing and tax compliance requirements.
