The Indonesian government has implemented a 12% Value-Added Tax (VAT) on certain luxury goods and services starting January 1, 2025. This new tax policy aims to target only high-end items, as clarified by Finance Minister Sri Mulyani Indrawati. Goods and services not considered luxurious will remain under an 11% VAT.
### Selective Application of 12% VAT
Luxury items subject to the 12% VAT include:
1. Luxury residences such as apartments, condominiums, and townhouses priced at Rp30 billion or higher.
2. Manned balloons, non-motorized aircraft, certain types of firearms excluding those for government use, and luxury cruise ships.
### Gradual Tax Increase
The gradual increase in VAT rates, as stipulated in Law No. 7 of 2021 on Tax Regulation Harmonization, rose from 10% to 11% in April 2022 and further to 12% in 2025. President Prabowo Subianto emphasized that this incremental adjustment was intended to minimize its impact on consumer purchasing power, inflation, and economic growth.
### Exemptions from 12% VAT
Certain essential goods and services are exempt from the 12% VAT increase and will continue to be taxed at 11%:
– Rice
– Corn
– Soybeans
– Fruits and vegetables
– Livestock products
– Fresh milk
– Poultry
– Seafood
– Rail and air tickets
– Public transportation services
– Education services
– Healthcare services
– Financial services
– Insurance services
This tax policy shift aims to balance revenue generation with the public’s purchasing power and economic stability. By targeting luxury items with a higher VAT rate while maintaining lower rates for essential goods and services, the government hopes to mitigate the impact on everyday consumers while still meeting revenue targets.
Remember, understanding the implications of these tax changes and how they may affect your daily life is crucial. Stay informed and make informed financial decisions to navigate these changes effectively.
