https://epajak.or.id/ Effects of Luxury Goods VAT Increase on Capital Market Transactions, 11 or 12 Percent VAT
Although the Harmonisation of Taxation Regulations (HPP) Law previously called for an increase in Value Added Tax (VAT) from 11 per cent to 12 per cent, the government has confirmed through President Prabowo Subianto’s official statement and the issuance of PMK No. 131 Year 2024 that the 12 per cent VAT rate only applies to luxury goods, while other goods and services that are not classified as luxury goods are still subject to the 11 per cent VAT rate that has been in effect since 2022.
Will the capital market be affected? As an investor or someone who has dealings in the capital market, you can seek help from a Jakarta tax consultant to address various issues related to the shift in tax policy in capital market transactions, even those related to VAT on Luxury Goods.
IDX Explanation on 12 Percent VAT in the Capital Market
The Indonesia Stock Exchange (IDX) has issued a circular letter regarding the adjustment of the VAT rate which will come into effect on 1 January 2025. ‘The 12 per cent VAT rate is calculated by taking 11/12 of the invoice value as the tax object value, which results in an effective VAT rate of 11 per cent,’ said Irvan Susandy, Director of Trading and Exchange Member Regulation of the IDX. This tax burden will be passed on to Exchange Members (ABs), who will then pass it on to their customers, Irvan added. As the new system will apply the same rate to all transactions on the exchange, issuers will also be subject to the same requirements.
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Presidential Approval for Expensive Goods
President Prabowo Subianto confirmed on 31 December 2024, that the VAT rate will increase to 12% only for luxury goods and services. Luxury products include items such as boats, private planes, and luxury residences. Services that are not classified as luxury products will continue to be subject to the 11% VAT rate.
Investor Impact and Market Reaction
As the impact of the previously anticipated VAT hike proved to be modest, market participants seemed to appreciate this change. Investors are more interested in market movements and monetary policy than the VAT rate adjustment, according to Hendra Stevin of NH Korindo Sekuritas. However, the transaction cost structure will still be affected by the rate change. To ensure a smooth transition, the Indonesia Stock Exchange and Indonesia Central Securities Depository (KSEI) are still working closely with the authorities.
Knowledge and Active Action
Market participants are urged by the IDX to understand the specifics of this development in order to predict its impact. In order to maintain market stability, the IDX and KSEI will continue to educate exchange members, issuers, and consumers. The Government’s efforts to balance state tax revenue and the attractiveness of investment in the Indonesian capital market are reflected in this policy. It is expected that market participants will continue to take proactive steps to prepare for these changes in order to maintain smooth operations and investment competitiveness.
One of the most appropriate steps is also to consult with a Jakarta Tax Consultant. Because as tax professionals, they certainly understand the basis of taxation that applies in this investment world. Even with various policy companies, tax consultants can be the frontline for taxpayers who lack information about the latest tax policies that apply today.
If you are in Jakarta with tax problems, and need help from a trusted professional Jakarta tax consultant, you can contact us on this page to conduct an online tax consultation. So that your business tax payments are optimised and not overly complicated.