A Closer Look at the Overcharge Service Vat and Tax in Indonesia

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Eating out at a nice Bali restaurant is such a heavenly experience. However, it could turn fast into a nightmare when the restaurant overcharges you with their service tax. There are many cases in Bali where the restaurant overcharges their customer with service charge to the point where you will get a little heart attack when you see the bill. 

Restaurant tax or PB1 is not a PPN or Value Added Tax. The 10% tax is a local one known as PB1 or PHR (Hotel and Restaurant Tax). It is gathered by a Kabupaten (Regency) or a City, such as DKI Jakarta or Denpasar, Bali, which is different than service tax. Technically, it is not a Value Added Tax (VAT), but it appears to be one from the customer’s viewpoint.

The hotel or restaurant gathers the service tax. This tip will be distributed to the employees at the end of the month. There are no guidelines as to how it should be done. Some companies will distribute it equally among all employees, from the workplace to the kitchen. Some do not and instead choose to give it to a few workers.

Find more about Indonesia service tax and vat rate here

The Service charge ranges from 5% at a restaurant to 10% at a hotel. A restaurant or spa within a hotel will also have to pay 10%. Some independent restaurants may gather more than 5% of the service fee to encourage their employees. It is also a method for a business proprietor to raise wages without using their own money.

Overcharge service tax bill
Source Quora

In Jakarta, five-star hotels may pay each staff up to IDR 4,000,000 monthly. Even better, the Saint Regis Hotel in Bali is said to have a service tax that can reach IDR 7,000,000 per staffer during the finest months. The fact that the service tax makes up most of the pay in many well-known hotels and eateries is unquestionable.

However, most restaurants in Bali will charge you 11% of service charge at every purchase to round up the number. This unruly behavior leads most guests to get overcharged and paid much more than it is supposed to. It’s been a long and ongoing discussion on how bad fraud behavior is in this industry.

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