- Indonesia’s standard VAT rate for luxury items increases from 11% to 12%
- The increase targets goods not essential and typically consumed by high-income earners
- Effective from 1 January 2025, this change is part of a broader tax reform to enhance fiscal sustainability and reduce the budget deficit
- The reform aims to support infrastructure, public services, and social programs while aligning VAT rates with regional standards to maintain global competitiveness
- Ministry of Finance Regulation No. 131 Year 2024 details the VAT rate application, effective from 31 December 2024
- The 12% VAT rate applies to goods and services with a Luxury Goods Sales Tax, based on selling price or import value
- Essential goods and public services like education, healthcare, and transportation remain VAT-exempt
- The government commits to an economic stimulus package to support purchasing power and the national economy during the VAT rate adjustment
- New regulations are being drafted to clarify which goods and services are subject to the new 12% VAT rate, ensuring legal certainty and smooth implementation
Source: bdo.global
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.
