Indonesia To Introduce 0.1% Crypto VAT, Income Tax Next Month

Indonesia will begin taxing crypto transactions by way of a value-added tax (VAT) and an income tax next month in a move that could net the government additional revenue from domestic trading activity.

According to a report by Reuters on Friday, the archipelago, which is made up of more than 17,000 islands, will begin charging 0.1% on both VAT and income tax by May 1.

“Crypto-assets will be subject to VAT because they are a commodity as defined by the trade ministry,” tax official Hestu Yoga Saksama told a media conference last week. “They are not a currency…so we will impose income tax and VAT.”

VAT is a form of taxation applied to goods and services at every step along the supply chain or sale to end consumers. Indonesia’s rate of 0.1% is significantly lower than the 11% it charges for other products. By comparison, Australia levies a rate of 10% while the US has a sales tax set at the state level ranging from 0% to 11.5%.

The move follows the country’s wide-ranging tax reforms last year — amid the nation’s economic recovery from the Covid-19 pandemic — which included provisions to tax profits on crypto trading activity.

Indonesia’s government is still working on the implementation of those regulations, Saksama said, as cited in the report.

Like other Asian nations within the region, including Thailand and Vietnam, Indonesia has outlawed crypto for use in payments, though its citizens are allowed to trade them as a commodity.

Indonesia is Southeast Asia’s largest economy, according to data by The World Bank. The nation is also the world’s fourth-largest largest, with a population exceeding 273 million people across 300 ethnic groups.

It is estimated that more than 2.6%, or 7.2 million Indonesians, currently own some form of crypto, data by payments provider Triple A shows.

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