Taxation ยท KBLI 19200

Oil Refinery Tax Compliance

Crude import tax, subsidized fuel VAT, refinery land tax, and downstream oil and gas tax planning

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What usually goes wrong

  • Subsidized vs Non-Subsidized Fuel VAT

    Subsidized fuels receive different VAT facilities (exempt or government-borne), while non-subsidized fuels are subject to 11% VAT โ€” requiring separate accounting and invoice administration for each fuel type.

  • Large-Volume Crude Import Tax

    Crude oil imports of hundreds of thousands of barrels per shipment generate significant Article 22 income tax at 0.5% that impacts working capital even though it is creditable.

  • Refinery Land and Building Tax

    Refineries occupying thousands of hectares of land with complex processing facilities face very large PBB obligations that require careful NJOP valuation review and potential appeals.

  • Fuel Excise Administration

    Fuel products are excisable goods requiring CK-1 documentation, periodic excise reporting to Customs, and separate accounting for excise-paid versus excise-exempt products.

  • Cross-Agency Regulatory Compliance

    Refineries must simultaneously comply with DGT (tax), DJBC (customs and excise), and Ditjen Migas (oil and gas) requirements โ€” each with different reporting cycles and documentation standards.

What we do

  1. 01

    Fuel Tax Classification System

    Automated classification and accounting system between subsidized and non-subsidized fuel products for correct VAT treatment, invoice codes, and reporting for each product category.

    • Accurate VAT per fuel type
    • Correct tax invoices
    • Targeted subsidy tracking
  2. 02

    Import Tax and Cash Flow Planning

    Strategic planning of Article 22 income tax and other import duties on crude oil and refinery feedstocks with arrival scheduling, facility utilization, and cash flow optimization.

    • Optimal working capital
    • Planned cash flow
    • Facilities maximized
  3. 03

    PBB Compliance and Appeals

    Periodic review of refinery land and building NJOP valuations with professional appeal support for disputes with regional tax authorities on excessive assessments.

    • Measured PBB
    • Minimal disputes
    • Accurate budgeting
  4. 04

    Excise and Customs Compliance

    Management of fuel excise administration including CK-1 documentation, periodic excise reporting, and customs facility applications for refinery equipment imports.

    • Excise compliance
    • Lower penalty risk
    • Facilities utilized

Related regulations

  • PMK-34/2017

    Import Income Tax

    Income tax on crude oil and refinery raw material imports

  • PP 74/2021

    Fuel VAT

    VAT provisions for subsidized and non-subsidized fuel

  • UU 7/2021

    Tax Harmonization Law

    VAT rate change to 11% affecting fuel industry

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

Is subsidized fuel subject to VAT?

Certain subsidized fuels such as Premium (RON 88) and subsidized diesel receive VAT facilities โ€” either fully exempt or with the VAT borne by the government through the state budget (APBN). Non-subsidized fuels such as Pertamax, Pertamina Dex, and aviation fuel (avtur) are subject to standard 11% VAT. Refinery companies must maintain separate tax invoice administration for subsidized and non-subsidized fuel products.

What is the Article 22 import tax rate on crude oil?

Crude oil imports by importers with API are subject to Article 22 income tax at 0.5% of the import value (CIF + import duty). This tax is non-final and can be claimed as a tax credit in the annual corporate income tax return. Importers may apply for a SKB (exemption letter) for Article 22 if they meet specific criteria under applicable regulations. Given the large volumes involved, this tax has significant working capital implications.

Are refinery products subject to excise duty?

Yes, fuel products are classified as excisable goods under the Excise Law. However, most fuel products receive excise exemption, particularly those used for public transportation and subsidized categories. Non-subsidized fuel products are subject to excise at rates determined by PMK. Excise administration requires CK-1 documentation and periodic reporting to DJBC (Customs). Refineries must maintain separate production and distribution records for excise purposes.

What tax incentives are available for new refinery investments?

New refinery construction investments may qualify for: (1) Tax holiday for pioneer sector investments under PMK-130/2020 (5-20 year income tax reduction), (2) Tax allowance providing 30% net income reduction over 6 years, (3) Import duty exemption on refinery equipment through Masterlist facility, (4) VAT not collected on imported machinery. Applications are coordinated through BKPM with detailed investment documentation requirements.

How should refineries handle PBB on their facilities?

Refinery land and buildings are subject to PBB (land and building tax) based on NJOP determined by the regional tax office. The NJOP should reflect the land value as industrial property rather than speculative commercial values. Processing units, storage tanks, and pipelines are included in the building assessment. Refineries should conduct periodic independent valuations and file PBB objections if the assessed NJOP exceeds market value, as overvaluation can result in significant excess tax payments.

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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