Indonesia Introduces 12% VAT on Luxury Goods, Exempts Basic Necessities

• Indonesia has implemented a 12% VAT on luxury goods and services starting January 1, 2025
• The increase is a 1 percentage point rise from the previous rate
• Essential goods remain unaffected by this hike, ensuring minimal impact on the general public
• Luxury items such as private jets, yachts, cruise ships, and luxury homes are subject to the new VAT rate
• Basic necessities like rice, meat, fish, eggs, vegetables, and fresh milk are exempt from VAT, maintaining a 0% tax rate
• The policy aims to reverse the effects of a prior announcement that led to increased consumer prices and social unrest
• The government is introducing relief measures including rice assistance and a 50% reduction in electricity bills for many families
• Additional support includes partial VAT exemptions for electric and hybrid vehicles and certain housing purchases
• Indonesian President Prabowo Subianto announced an economic stimulus package to counterbalance the VAT increase’s potential impact on purchasing power
• The VAT increase is intended to boost the economy across various sectors including manufacturing, trade, and digital industries

Source: e.vnexpress.net

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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