Heaptalk, Jakarta — Indonesia’s Minister of Finance, Sri Mulyani Indrawati, has confirmed that the planned increase in the value-added tax (VAT) rate to 12% will take effect on January 1st, 2025, following the 2021 Tax Regulation Harmonization Law (HPP).
She explained that this decision is driven by the country’s budgetary needs, fiscal health, and the economic challenges posed by the COVID-19 pandemic across key sectors. Minister Sri Mulyani outlined the range of goods and services the 12% VAT rate will impact.
She further detailed the categories of taxable transactions, which include the sale of taxable goods (BKP) within Indonesian customs areas by registered businesses, the utilization of taxable services (JKP) from outside the customs area within Indonesia, the export of tangible BKP by taxable entrepreneurs, and the export of intangible BKP and JKP by taxable entities.
Aware of potential concerns over the new VAT rate’s impact on consumer purchasing power, Sri Mulyani emphasized the Ministry of Finance’s commitment to educating the public about the rationale behind the tax adjustment, hoping to foster better understanding and acceptance.
“This VAT increase follows an incremental approach that began with the rise to 11% in April 2022. The HPP Law, developed under President Joko Widodo’s administration, mandates a gradual increase, reaching 12% by 2025. However, given signs of weakening purchasing power, several stakeholders have called for a reassessment of the policy, leaving the final decision to the incoming administration to evaluate its continuation,” she concluded.
