The Indonesian government announced on April 1st that it would levy a 0.1 percent income tax on crypto earnings and a VAT on crypto purchases. Director of Tax Regulations of the Ministry of Finance, Hestu Yoga Saksama, confirmed to CNN Indonesia that the Indonesian government decided to tax capital earning income from crypto investments at 0.1 percent. The same rates would be levied on Value Added Tax (VAT) on crypto purchases. Both taxes would apply from May 1st. The government is still working on the implementation of the tax regulations.
The director explained the rationale for charging income and VAT on crypto purchases. The Indonesian government levied income and VAT on crypto purchases because the Central Bank, Bank of Indonesia and Ministry of Commerce consider crypto to be a commodity and not a means of payment. However, Saksama said that crypto assets are also not considered currency.
It is also notable that the VAT levied on crypto assets is much lower than the 11 percent VAT levied on most goods and services in Indonesia. In addition, the income tax of 0.1 percent on capital gains on stocks listed on the Indonesian Stock Exchange is the same.
Crypto asset adoption surged in Indonesia during the COVID-19 pandemic, with the number of crypto asset holders growing exponentially to reach 11 million by the end of 2021. Crypto asset transactions in commodity futures markets peaked in the year 2021 $59.8 billion, more than 10 times the 2020 transaction value, according to data from the Commodity Futures Trading Regulatory Agency, Reuters reported. Currently, the Indonesian government allows crypto assets to be traded as commodities, but prohibits them from being used as a means of payment.
The new taxation comes after Indonesia’s parliament passed legislation in October 2021 for sweeping tax revisions, including increasing VAT in 2022 to generate more revenue hit during the pandemic and ensure tax compliance.
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