Indonesia proposes to impose a value-added tax (VAT) on cryptocurrency transactions and an income tax on capital gains from such investments as a consequence of the recent surge in crypto trading.
According to Reuters, Indonesia intends to levy a 0.1 percent VAT on both transactions and capital gains from such investments beginning May 1, according to tax official Hestu Yoga Saksama.
Following the breakout of COVID-19 in Southeast Asia’s largest economy, demand for digital assets has surged, with the estimated number of crypto holders reaching 11 million by the end of 2021.
According to data from the Commodity Futures Trading Commission, the total value of cryptocurrency transactions in commodity futures markets reached 859.4 trillion rupiahs ($59.8 billion) in 2018, more than tenfold the amount in 2020.
For the first time ever, Cardano-based smart contracts cross the 2,000 mark. The IMF fears that Russian sanctions might increase cryptocurrency use and weaken the dollar’s dominance. Indonesians are entitled to trade cryptocurrencies as commodities, but not as a means of payment.
“Crypto-assets will be subject to VAT since they are considered a commodity under the commerce ministry’s definition. They are not a medium of exchange,” Saksama said at a press conference. “As a result, we will apply income tax and value-added tax.”
The VAT on cryptocurrency in Indonesia is much lower than the country’s normal sales tax (GST), which is 11%. Capital gains are taxed at the same rate as shares: 0.1 percent of the gross transaction value.
Officials noted that last year’s comprehensive tax law laid the legal groundwork for the levy of taxes on crypto assets.
More precisely, the legislation sought to boost tax collection in the aftermath of the COVID-19 outbreak, which had a detrimental effect on revenue collection.