e-Invoicing in Indonesia: Timeline, Guidelines, Process, and Steps for Implementation

Indonesia's e-invoicing system, e-Faktur, requires all VAT-registered businesses with sales over IDR 4.7 billion to use it. It generates e-invoices, which are digitally signed, validated, and integrated into tax returns with a QR code.

This blog explores Indonesia's e-invoicing system, e-Faktur, its process, benefits, and compliance requirements for businesses.

What is E Invoicing in Indonesia?

E-invoicing in Indonesia, known as e-Faktur, is a digital system designed to simplify the declaration and reporting of Value-Added Tax (VAT). July 2016 as the e invoicing start date, e-Faktur has been mandatory for all taxpayers registered for VAT purposes, especially those whose annual sales exceed IDR 4.7 billion (around USD 333,000). 

As per e invoice guidelines, VAT-registered businesses, called Pengusaha Kena Pajak or PKP, are required to issue VAT invoices electronically and submit them through the e-Faktur system.

To issue an e invoice, businesses must use e-Faktur Pajak, the application provided by the Directorate General of Taxes (DGT). Failing to comply can result in a fine of 1% of the VAT base.

E-Invoicing Implementation Timeline

Here’s a quick look at the timeline at the e invoicing implementation in Indonesia:

1. 2015: The government introduced e-Faktur as a mandatory requirement for high-revenue businesses registered for VAT.
2. 2016–2020: The threshold for mandatory e-invoicing was extended to all businesses with annual sales over IDR 4.7 billion. Smaller businesses and additional taxpayer categories were also brought under the system over time.
3. 2021 and beyond: The e-Faktur platform saw updates focused on better user experience, enhanced data security, and integration with other financial and tax systems.

Type of E-Invoices in Indonesia

Indonesia categorizes e-invoices into different types:

• Input Tax Invoice: Issued to buyers from VAT-registered sellers. This document enables buyers to claim back the VAT they’ve paid.
• Output Tax Invoice: Issued by businesses when selling goods or services. It reflects the VAT that the seller must remit to the tax authorities.
• Credit and Debit Notes (Output Tax Return): Used to make adjustments to previously issued tax invoices—either increasing or decreasing the amounts.
• Other AR (Accounts Receivable) Documents: Related to incoming taxable transactions and used to track payments or receivables from customers.
• Other AP (Accounts Payable) Documents: Related to outgoing taxable transactions—typically to vendors or suppliers.

How E-Invoices Work in Indonesia

Here's how the e-Faktur system works from start to finish:

1. Taxpayer Registration

Businesses must first register with the DGT. As part of this process, they:

• Obtain an electronic certificate that authorizes them to create and submit an e invoice in Indonesia.
• Request a sequence of invoice numbers (Nomor Seri Faktur Pajak, or NSFP) to be used for issuing invoices.

2. Invoice Generation

Invoices are created using the e-Faktur application provided by the tax authority. Each invoice must be:

• Digitally signed
• Include a unique NSFP
• Include all required transaction and taxpayer details

3. Submission and Validation

Once the invoice is generated, it is submitted electronically to the DGT system. The system checks for:

• Correct format and structure
• Accurate tax calculation
• Presence of all mandatory fields

If everything is in order, the invoice is digitally signed by the system and approved.

4. QR Code Assignment

Validated invoices receive a QR code generated by the DGT. This QR code:

• Serves as proof that the invoice is official and recognized
• Contains over 16 fields of critical invoice data
• Can be scanned for instant verification

5. Buyer Communication and Storage

After approval, the seller sends the validated invoice to the buyer. The invoice is also electronically stored and automatically integrated into the business’s VAT return.

Who Needs to Comply with E-Invoicing in Indonesia?

If a business’s annual turnover exceeds IDR 4.7 billion, it is obligated to register as a VAT-registered taxpayer and must use the e-Faktur system for issuing electronic tax invoices.

Even foreign businesses with permanent establishments or branches within Indonesia must comply. If they are conducting taxable transactions within the country.

Benefits of E-Invoicing in Indonesia

Indonesia’s shift to digital invoicing offers clear benefits for businesses and tax authorities alike:

• Greater Accuracy: Digital formats reduce manual errors and ensure consistent tax calculations.
• Real-Time Compliance: Instant validation from the DGT means fewer delays and quicker reporting.
• Enhanced Transparency: Transactions are monitored live, improving tax governance and reducing fraud.
• Faster VAT Credits: Buyers can claim input tax credits more efficiently with validated e-invoices.
• Simplified Tax Filing: E-invoices integrate directly with VAT returns, easing the compliance process.

How Can ClearTax Help a Business With E-Invoicing in Indonesia?

ClearTax offers a powerful, cloud-based e-invoicing solution tailored to meet Indonesia’s regulatory requirements. Here's how it helps:

• End-to-End Automation: Generate, validate, and send e-Faktur invoices in a few clicks — no manual steps required.
• Smooth Integration: ClearTax integrates easily with existing ERPs or accounting systems, syncing invoice data in real-time.
• Built-in Compliance: Stay updated with changing e-Faktur rules and avoid penalties with automatic checks and validations.
• Multi-format Support: Easily generate invoices in the required XML format and get real-time approval from the DGT.
• Audit-Ready Reports: Get centralized access to validated invoices, complete with audit trails and summary reports for tax filings.

Conclusion

Indonesia e-invoicing system, e-Faktur, is mandatory for all VAT-registered businesses with annual sales above IDR 4.7 billion. Even foreign entities with a local presence must comply with it. It ensures real-time validation and reporting of VAT through the Directorate General of Taxes. E-invoices are created using the official e-Faktur application, digitally signed, and submitted for validation. Once approved, they are assigned a QR code and integrated into tax returns.