Taxation ยท KBLI 47721

Pharmacy & Pharmaceutical Tax

Pharmacies and pharmaceutical industries face complex VAT regulations: medicines are VAT-exempt when provided as part of medical services, but subject to VAT when sold retail. Additionally, the pharmaceutical industry collects Article 22 Income Tax on product sales. Arunika Consulting helps pharmacies and pharmaceutical distributors understand different tax obligations for each transaction type.

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What usually goes wrong

  • Medicine VAT: Exempt vs Taxable

    Medicines provided as part of medical services are VAT-exempt, but medicines sold directly (OTC) are subject to 11% VAT.

  • Article 22 Income Tax for Pharmaceutical Industry

    Pharmacies purchasing from pharmaceutical industries are subject to Article 22 Income Tax collection that must be credited in the Annual Tax Return.

  • Limited Profit Margin

    Maximum Retail Price (HET) for government program medicines limits margins, while tax obligations remain.

What we do

  1. 01

    VAT Transaction Separation

    Developing a recording system that separates medicine sales through prescriptions (medical services) from over-the-counter sales (OTC).

    • Accurate VAT
    • Compliance maintained
    • Clean audit trail
  2. 02

    Article 22 Income Tax Reconciliation

    Tracking all Article 22 Income Tax collection proofs from pharmaceutical suppliers to be credited in the Annual Tax Return.

    • Complete tax credits
    • No overpayment left behind
    • Organized documentation
  3. 03

    Input VAT Optimization

    Ensuring all Input VAT from medicine purchases and operations can be credited.

    • Minimal VAT burden
    • Good cash flow
    • Optimal tax position

Related regulations

  • PMK-83/2023

    VAT on Medicine Sales

    VAT provisions for medicines including government-borne VAT (DTP) for specific programs.

  • PPh Pasal 22

    Article 22 Income Tax Collection by Pharmaceutical Industry

    Pharmaceutical industry as Article 22 tax collector with 0.3% rate on medicine sales.

  • PP 49/2022

    VAT Exemption on Health Services

    Medicines provided as part of medical services may be exempt from VAT under certain conditions.

If the tax office starts asking questions

The team that keeps your books and files your taxes also stays with you through an SP2DK, an audit, an objection and an appeal.

How we handle tax disputes

Frequently Asked Questions

Are all medicines subject to VAT?

No. Medicines provided as part of medical services (doctor prescriptions at clinics/hospitals) are VAT-exempt. OTC medicines sold retail are subject to 11% VAT.

What is government-borne medicine VAT?

Certain medicines in government programs (vaccines, subsidized generic medicines) have Government-Borne VAT so pharmacies do not collect it.

What if a pharmacy is not yet a Taxable Entrepreneur (PKP)?

Pharmacies with turnover below IDR 4.8 Billion may choose not to become PKP. However, they cannot issue tax invoices and Input VAT cannot be credited.

Who handles my tax work?

Your tax work is handled by Arunika's tax consultants. We confirm the scope, deadlines and price before work starts.

What should I do if I receive an SP2DK letter or tax audit notice?

Contact us early. We help analyze the risk, prepare supporting documents, draft the response, and assist discussions with the tax office.

What does tax planning cover?

We review your structure, transactions and available incentives so tax is calculated under the rules, without crossing into tax evasion. The outcome depends on your facts, so we do not promise a savings figure.

Related Industries

Tell us about your business

Send your line of business, rough annual turnover, and what is going wrong. We reply on WhatsApp.

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