Heaptalk, Jakarta — Indonesia’s government has determined that the 1% increase in Value-Added Tax (VAT) rates, from 11% to 12%, will officially apply exclusively to luxury goods and services, effective this year.
Furthermore, the Minister of Finance, Sri Mulyani, clarified that the 12% VAT hike will be limited to luxury items already subject to the Luxury Goods Sales Tax (PPnBM). These include private jets, yachts, luxury cruise ships, high-end residential properties such as houses or apartments valued above US$1.8 million, approximately Rp30 billion, and premium motor vehicles, all of which will be subject to the revised 12% VAT rate.
“This category is particular and limited. Items such as private jets, yachts, and luxury homes, whose values are regulated under the Ministry of Finance Regulation (PMK) on Luxury Goods VAT, Number 15/2023, fall within this classification.” Minister Sri conveyed during the press conference. (01/01)
Goods and services that have long been exempt from Value-Added Tax (VAT) at a 0% rate, meaning they are entirely free from VAT obligations, remain unaffected by the 12% VAT increase. These exemptions primarily apply to essential items related to staple foods.
The goods exempt from the 12% VAT hike include rice, corn, soybeans, fruits, vegetables, sweet potatoes, sugar, fresh milk, poultry, peanuts, livestock, fish, shrimp, seaweed, and other marine biota. Additionally, exemptions extend to services such as train tickets, airport tickets, passenger transportation, public transit services (including river and ferry crossings), large-scale package delivery services, freight forwarding, and travel agency services, all shielded from the VAT increase.
As is known, this VAT adjustment aligns with the mandate of Law No. 7 of 2021 on the Harmonization of Tax Regulations. As per the agreement between the government and the House of Representatives (DPR), the VAT rate increase is being implemented incrementally, rising from 10% to 11% in April 2022 and scheduled to reach 12% by January 1, 2025.
Concurrently, the archipelago’s president, Prabowo Subianto, emphasized that the taxation policy prioritizes the people’s welfare and promotes comprehensive economic equity. The government is also committed to providing a stimulus package to support the Indonesian public.
“The measures include distributing 10 kilograms of rice monthly to 16 million beneficiaries of food assistance programs, offering a 50% discount on electricity bills for customers with a maximum power capacity of 2,200 volts, financing labor-intensive industries, providing income tax (PPh Article 21) incentives for workers earning up to Rp10 million per month, and granting tax exemptions for MSMEs with annual turnovers below Rp500 million. In total, the stimulus package amounts to Rp38.6 trillion,” President Prabowo added.