Taxation ยท KBLI 15200
Footwear Industry Tax Optimization
Export income tax, VAT facilities, export duty, and tax planning for export-oriented shoe factories
Important Note
Export-oriented footwear must fulfill income tax and VAT export compliance with complete documentation.
What usually goes wrong
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Raw Material Import Tax Management
Imports of leather, soles, and accessories from China, Vietnam, and Italy are subject to Article 22 income tax that serves as a tax credit but affects cash flow โ tracking hundreds of shipments annually requires systematic processes.
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Recurring Export VAT Refund Cycle
Export-oriented footwear manufacturers routinely claim VAT refunds because export sales at 0% VAT generate ongoing overpayment positions while input VAT on raw materials and overhead is paid in full.
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HS Code Classification and Export Duty
Correct HS code classification for different footwear types (athletic, formal, casual, sandals) determines both export duty rates and preferential tariff eligibility under free trade agreements.
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Free Trade Agreement Preference Claims
Footwear exporters must maintain correct certificate of origin documentation (SKA, Form E, Form AANZ) to claim preferential duty rates in destination markets โ errors in documentation can forfeit tariff savings.
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Tax Allowance for Capital Investment
Footwear manufacturers investing in new production capacity may qualify for tax allowance incentives, but the application through BKPM requires detailed documentation of investment value, employment creation, and export orientation.
What we do
- 01
Import Tax Credit Management
Systematic tracking of Article 22 import tax credits with organized PIB documentation for optimal tax credit claims in annual returns and planned cash flow management.
- Maximum tax credit claims
- Accurate annual returns
- Planned cash flow
- 02
VAT Refund Fast Track
Assistance with export VAT refund applications using the preliminary refund mechanism for low-risk exporters, including complete documentation and tax invoice reconciliation.
- Faster refund processing
- Optimal cash flow
- Audit-proof documentation
- 03
HS Code and FTA Classification Review
Comprehensive review of HS code classification for all footwear products to ensure correct export duty treatment and maximum FTA preference utilization across destination markets.
- Minimal export duty
- FTA preferences maximized
- Lower dispute risk
- 04
Tax Allowance Application
End-to-end support for tax allowance applications under PP 78/2019 for new footwear manufacturing investments and capacity expansion projects.
- Tax facilities reviewed
- Better investment returns
- Full compliance
Related regulations
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PMK-34/2017
Import/Export Income Tax 22
Income tax collection on raw material imports and footwear product exports
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PP 40/2013
Labor-Intensive Industry VAT
Possible VAT facilities for footwear as export-oriented labor-intensive industry
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PMK-65/2021
Export Duty
Export duty provisions for footwear products to certain destination countries
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.
Frequently Asked Questions
What is the export income tax rate for footwear products?
Footwear product exports are subject to Article 22 income tax at 0.5% of the export value for exporters without API, and 0% for exporters with API. This export tax is final and cannot be credited against corporate income tax. Exporters should check the latest PMK provisions as rates and coverage are periodically reviewed. The tax is collected by banks through the customs payment system.
Can the footwear industry qualify for tax allowance incentives?
Yes, footwear manufacturing is classified as a processing industry eligible for tax allowance under PP 78/2019. To qualify, manufacturers must meet criteria including: minimum investment value (typically above IDR 100 billion), significant employment creation, and export orientation. The incentive package includes 30% net income reduction over 6 years, accelerated depreciation, extended loss carryforward up to 10 years, and reduced withholding tax on certain payments.
How is VAT applied to free sample footwear shipments?
Free sample footwear shipments to buyers are treated as deemed taxable supplies subject to 11% VAT. The taxable base uses the fair market value of the samples. The recipient can credit the input VAT if they are a registered PKP. The manufacturer must issue a tax invoice using code 04 (other value base) for free-of-charge supplies. Proper documentation of sample values and recipient details is essential.
What customs documentation is critical for footwear exporters?
Key documentation includes: PEB (customs export declaration) matching actual shipped quantities and values, commercial invoices, packing lists, certificate of origin (SKA or FTA-specific forms like Form E for ASEAN), and shipping documentation (bill of lading or airway bill). Accuracy between these documents is critical โ discrepancies can trigger customs audits and potential penalties.
How should footwear manufacturers handle VAT on imported production machinery?
VAT on imported production machinery must be paid at the border (11% of import value) but can be claimed as input VAT credit if the manufacturer is a PKP. Manufacturers may qualify for VAT exemption on machinery imports through the Masterlist facility, provided the machinery is directly used in the production process. The Masterlist application requires detailed technical specifications and investment documentation.
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.
Tell us about your business
Send your line of business, rough annual turnover, and what is going wrong. We reply on WhatsApp.
Chat on WhatsApp- +62 851 1730 8880
- info@arunikaconsultant.com
- Sidoarjo, Jawa Timur