Indonesia Announces 0.1% Crypto VAT & Capital Gains Tax Starting May 1

Key Insights:

• Indonesia introduced a 0.1% VAT and capital gains tax on crypto transactions and investments.
• The taxes will come into effect from May 1.
• Taxes on crypto have been facing backlash from the community recently.

According to a Reuters report, Indonesia, starting May 1, will be charging a Value Added Tax (VAT) and an income tax on Capital gains from crypto asset-based transactions and investments, respectively. The tax has been set at 0.1% in both cases.

Why the Tax, Though?

Indonesia has been observing a rapid growth in crypto adoption in the country since the beginning of the Covid-19 pandemic, which is why a tax is not surprising. Hestu Yoga Saksama, a tax official in Indonesia, told a media briefing,

“Crypto assets will be subject to VAT because they are a commodity as defined by the trade ministry. They are not a currency, So we will impose income tax and VAT.”

Although the 0.1 VAT tax imposed on crypto assets is significantly lower than the 11% tax that other goods and services in the country carry.

Plus another reason why the crypto transactions carry only a 0.1% income tax on capital gains is that these taxes will be charged on the gross transaction amount.

Given that in February alone, Indonesia conducted crypto transactions worth more than $5.8 billion (83.8 trillion Indonesian Rupiah), even a 0.1% tax results in the government gaining $5.8 million or about 83.3 billion Indonesian Rupiah.

Besides, this is still a piece of good news as it signifies the growing acceptance of crypto in the country.

This is because just two months ago, FXEmpire reported the Tajdid Central Leadership (PP) Muhammadiyah, along with the Tarjih Assembly, issuing a fatwa against cryptocurrencies.

Calling Bitcoin and other cryptos “haram”, the fatwa cited the volatility of crypto assets as its reason for calling crypto “haram”.

Safe to say, it is a big step up for the country, even if cryptocurrencies aren’t accepted as a form of payment yet.

Around the World

While Indonesia is dealing with crypto in its own way, India too took a similar route by implementing a 30% crypto tax earlier last month, which came into effect yesterday (April 1).

Crypto has been a concerning topic for the government for more than five years now, given the ban and the upliftment of the ban, to now this 30% tax.

On top of that, the government isn’t too keen on planning a regulatory law for digital assets until a global census on the topic comes up.

While the citizens of India have already voiced their discontent with the policy, it doesn’t look like they will be able to bring much change anytime soon.