“Value Added Tax is imposed on:
a. delivery of Taxable Goods in the Customs Area carried out by Entrepreneurs;”
The Input Tax on the delivery of land can basically be credited with the Output Tax, because the transfer of land is a VAT object. Part E number 1 letter b SE-28/2021 states that:
“Input tax on the acquisition of land can be credited if it does not conflict with the provisions referred to in Article 9 of the VAT Law and its explanation.”
(Part E number 1 letter b SE-28/2021)
From these provisions it is known that the Input Tax on the acquisition of land can be credited with the Output Tax in the same Tax Period as long as it complies with the provisions of Article 9 of the VAT Law. However, Article 9 paragraph (8) of the VAT Law stipulates that input tax credits cannot be applied to expenditure in the form of:
acquisition of Taxable Goods or Taxable Services that do not have a direct relationship with business activities;
acquisition and maintenance of motorized vehicles in the form of sedans and station wagons, unless they are merchandise or leased out;
acquisition of Taxable Goods or Taxable Services whose Tax Invoice does not meet the provisions as referred to in Article 13 paragraph (5) or paragraph (9) or does not include the name, address and Taxpayer Identification Number of the buyer of Taxable Goods or the recipient of Taxable Services;
utilization of Intangible Taxable Goods or utilization of Taxable Services from outside the Customs Area whose Tax Invoice does not meet the provisions as referred to in Article 13 paragraph (6).
It is stated that Input Tax cannot be credited, one of which is for the delivery of Taxable Goods which do not have a direct relationship with business activities. It is clarified in the Elucidation section of Article 9 paragraph (8), expenses that are not related to business activities, namely:
“What is meant by expenses that are directly related to business activities are expenses for production, distribution, marketing and management activities. This provision applies to all business fields. In order to be credited, Input Tax must also meet the requirements that the expenditure is related to the delivery of which Value Added Tax is payable. Therefore, even though an expenditure meets the requirements for a direct relationship with business activities, it is still possible that the Input Tax cannot be credited, that is, if the said expenditure has nothing to do with the delivery of which Value Added Tax is payable.”
(Explanation of Article 9 paragraph (8))