Indonesia Announces 0.1% Crypto VAT & Capital Gains Tax

On crypto transactions and investments, Indonesia imposed a 0.1 percent VAT and capital gains tax.

The taxes will take effect on May 1st.

The community has recently reacted negatively to cryptocurrency taxes.

According to a report by Reuters, Indonesia will begin collecting a Value Added Tax (VAT) and an income tax on capital gains on crypto asset-based transactions and investments on May 1. In both circumstances, the tax is set at 0.1 percent.

But why is there a tax?

Since the beginning of the Covid-19 outbreak, Indonesia has seen a tremendous increase in crypto use, which is why a tax is unsurprising. "Crypto assets would be subject to VAT since they are a commodity as defined by the commerce ministry," Hestu Yoga Saksama, an Indonesian tax officer, said during a press conference. We will apply income tax and VAT since they are not a currency."

Although the 0.1 VAT tax on crypto assets is substantially lower than the country's 11 percent VAT on other products and services.

Furthermore, the fact that these taxes will be imposed on the total transaction amount is another reason why crypto transactions have just a 0.1 percent income tax on capital gains.

Given that Indonesia executed crypto transactions worth approximately $5.8 billion (83.8 trillion Indonesian Rupiah) in February alone, even a 0.1 percent tax would net the government $5.8 million, or around 83.3 billion Indonesian Rupiah.

Besides, this is still excellent news since it indicates the country's growing embrace of cryptocurrency.

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

The fatwa declared Bitcoin and other cryptos to be "haram," citing the volatility of crypto assets as the explanation.

Even though cryptocurrencies aren't currently recognized as a means of payment, it's a significant step forward for the country.

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While Indonesia is dealing with cryptocurrency in its own way, India followed suit by enacting a 30% crypto tax earlier this month, which took effect yesterday (April 1).

The government has been concerned about cryptocurrency for more than five years, from the prohibition to the lifting of the ban to now this 30% tax.

Furthermore, the government is delaying the development of a regulatory framework for digital assets until a worldwide census on the subject is conducted.

While Indian individuals have already expressed their dissatisfaction with the policy, it does not appear that they will be able to effect any change very soon.