Footwear Industry Tax Optimization

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.

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.

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.

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 — discrepancies can trigger customs audits and potential penalties.

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.

Yes. We are registered tax consultants and support clients with compliant, professional tax advisory and representation.

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

It depends on your structure and transactions. We identify legal efficiencies, incentives, and reporting improvements without crossing into tax evasion.