Indonesia, Southeast Asia’s largest economy, has announced plans to levy a value-added tax (VAT) on cryptocurrency transactions. Beginning May 1st, it also entails a 0.1 percent income tax on capital gains from such investments.
The declaration was made last Friday, amid a surge in crypto asset trade in the country. Crypto-assets would be subject to VAT, according to Hestu Yoga Saksama, a representative for the tax office. That’s because, according to the trade ministry, they’re a commodity. They will apply income tax and VAT because they are not a currency.
Saksama went on to say that the government is still working on drafting regulations for crypto-related taxation. Cryptocurrencies have a VAT rate of 5%, which is significantly lower than the 11% tax on most goods and services in Indonesia. Capital gains, on the other hand, taxes at the same rate as shares: 0.1 percent of the gross transaction value.
According to the source, the legal basis for taxation on crypto assets is a broad tax bill established by the government last year. He stated that the measure enacts to improve revenue collection, which hampers by the economic and social turmoil created by the Covid-19 outbreak.
Crypto on the Rise
The Financial Services Authority (OJK) of Indonesia is the government agency in charge of financial sector regulation. It issued a warning in January, stating that financial institutions do not permit to provide or support the selling of cryptocurrencies. This is despite the country’s booming cryptocurrency market.
Financial service institutions prohibit from using, marketing, or assisting crypto trading, according to the OJK. The regulator also cautioned that the value of cryptocurrency swings often. Individuals purchasing digital assets, on the other hand, should be completely aware of the hazards.
Indonesia authorizes cryptocurrency sales and trading on the commodities exchange. The Ministry of Trade’s Commodity and Futures Trading Regulatory Agency (CoFTRA) oversees this, not the OJK.
Within this year, the ministry is assisting with the establishment of a separate market for digital assets. This introduces as the Digital Futures Exchange. During the COVID-19 pandemic, there has been a boom in interest in digital assets in Indonesia. By the end of last year, the number of cryptocurrency owners had risen to 11 million.
Crypto transactions in commodity futures markets totaled 859.4 trillion rupiahs ($59.8 billion) last year. This is more than ten times the value of transactions in 2020. According to the Commodity Futures Trading Regulatory Agency, this is the case.
Indonesians can trade cryptocurrency as a commodity, according to the government’s approval. They cannot, however, utilize them as a means of payment.