Crypto Assets Taxation: Indonesia ready to collect VAT and income tax

The common use of crypto has led to an increase in crypto consumers, thus increasing the number of crypto investors. As the number of investors increases, it has led to legislation from various countries to look for effective controls that will prevent chances of fraud and other illegal activities.

The legislation process is not limited to protective measures; rather, governments are also considering making revenue out of this profitable situation. Various countries have worked on legislation to tax crypto assets, and the list includes major economies like India. Other countries are also working on the detail of bills that will impose taxes on crypto assets.

Mainstreaming of crypto and tax collection

The mainstreaming of crypto has benefitted customers to a great extent. Various governments were initially reluctant to recognize crypto assets as of any significance. The initial meeting came from the US, which passed laws regarding crypto. Several other countries have also worked on legislation to make crypto investment a profitable business for their citizens.

Countries like El Salvador went too far, which gave crypto assets an unexpected value, i.e., Bitcoin’s recognition as the legal tender. Different countries had been considering taxation of crypto assets as their finance ministries considered this decision’s potential perks.

India took the initial step and imposed a tax on crypto assets. Crypto investors criticized this tax because of the government’s little benefits to investors. Instead, the imposition of the tax was a negative step that would lower the investments, according to the critics.

The latest list is Indonesia which has imposed taxes on crypto assets. It had prepared laws for this tax a few months back, while the implementation will start in May 2022.  

Indonesia’s decision to collect taxes on crypto assets

Crypto assets have gathered value because of the increased influx of funds. The Indonesian parliament has approved the law to implement taxes on crypto investments. The taxes include Value Added Tax (VAT) and income tax, and the value of each would be 0.1% of the assets.

The data for the start of collecting the said taxes would be May 1, 2022. The boom in crypto investments was seen in 2021 when the number of investors in this Southeast Asian country grew to 11 million. The transactions value reached $59.8 billion, which showed an astounding increase in the flow of capital towards crypto. Indonesians can use crypto as a commodity while they are yet to use it as a payment method. Indonesian Finance Ministry is of the view that it is the right decision to impose VAT on crypto because of its use as a commodity, not as currency.  

Continuation of the previous legislation

Indonesia has continued the process of legislation to tax crypto assets since October 2021. Even though investors and market analysts had questioned the imposition of taxes, but government proceeded.

The imposed rate of VAT on other products is 11%, while that on crypto has been kept much lower. The current move is part of the major move to overhaul the taxation system. Indonesia is considered the largest economy in South-East Asia, and these taxes will add further to its value.

Final Thoughts

Indonesia has completed the legal process for imposing VAT and income tax on crypto, which is about 0.11%. The relevant authorities will start collecting taxes on crypto from May 2022. The ratio of taxes on these assets is much low compared to other commodities, while it is also low compared to other countries.