Indonesia imposes tax and VAT on crypto income and purchases at 0.1 percent

The Indonesian government announced the imposition of income tax at 0.1 percent on crypto income and VAT on crypto purchases on April 1. The Director of tax regulations for the Ministry of Finance Hestu Yoga Saksama confirmed to CNN Indonesia that the Indonesian government has decided to tax capital gains income from crypto investments at 0.1 percent.The same rates would be levied on value-added tax (VAT) on crypto purchases. Both the taxes would be applicable from May 1. The government is still working on the implementation of tax regulations.

The Director explained the rationale behind imposing income tax and VAT on crypto purchases. The Indonesian government levied income tax and VAT on crypto purchases because the central bank, Bank of Indonesia, and the Ministry of Trade consider crypto a commodity, and not a means of payment. However, Saksama said that crypto assets are not considered currency either.

It is also noteworthy that VAT imposed on crypto assets is much lower than the 11 percent VAT levied on most goods and services in Indonesia. adding that the 0.1 percent income tax on capital gains matches that on shares listed on the Indonesian stock exchange.

The adoption of crypto assets spiked in Indonesia during the COVID-19 pandemic, with exponential increase of the number of crypto asset holders to 11 million by the end of 2021. The crypto asset transactions in commodity futures markets reached $59.8 billion in 2021 which was more than 10 times higher than 2020's transaction value, according to the data from the Commodity Futures Trading Regulatory Agency, Reuters reported. Currently, the Indonesian government allows trading of crypto assets as a commodity but prohibits using it as a means of payment.

The new taxation comes after the Indonesian parliament approved a law in October 2021 for major tax overhauls, including raising VAT in 2022 for generating more revenues that were hit during pandemic and ensuring tax compliance.

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