Indonesia's VAT rate to rise to 12% from next year at the latest

From January 1, 2025, the government will increase the value-added tax (VAT) rate by 121 TP3T from the current 111 TP3T, however the Directorate General of Revenue (DGR) has said that it will be implemented after the new government takes office.The increase in VAT is regulated by Law No. 7 of 2021 on the harmonization of tax regulations. According to this provision, the VAT rate can be increased from 11% to 12% by January 1, 2025.The Director General of Extension, Services and Public Relations of the General Directorate of Taxation said that regarding the time of implementation, they are guided by the authorization of the HPP Law, i.e., January 1, 2025 at the latest. Notwithstanding the provisions of the HPP Act, the Directorate General of Taxes will follow the new government's instructions on the implementation of 12% VAT. The Coordinating Minister for Economic Affairs also signaled that the VAT rate will be increased to 12% next year.He did not specifically answer whether the VAT will be increased or not, although he did say that the next government will continue with the current government programs, including the regulations passed under Joko. They see that the Indonesian people have made a choice and that choice is sustainability. If it is sustainable, of course the various programs introduced by the government will continue, including the VAT policy.

According to Law No. 7 of 2021, many goods and services are exempt from VAT. The list of goods exempted from VAT includes food and beverages provided in hotels, restaurants and food stalls, due to the fact that these goods are subject to local taxes and local levies (PDRD). This includes food and beverages provided whether in hotels, restaurants, eateries, stalls, etc., including food and beverages whether consumed on the premises or not, including food and beverages provided by catering or catering businesses, which are subject to local taxes and local levies in accordance with the provisions of the laws and regulations in the field of local taxes and local levies. In addition, items exempted from VAT include currency and gold bullion used for the state's foreign exchange reserves, as well as securities. In addition to this, many services are also exempted from VAT, such as religious services, arts and entertainment services, hotel services, catering services and parking space provision services also remain exempted from VAT as they are PDRD objects and their provision is regulated by the local government. Catering or catering services include all catering provision activities that are the object of local taxes and local taxation according to the laws and regulations in the field of local taxes and local taxation.