Indonesian Trade Ministry Implements New Crypto Taxes Following Surge in Transaction Volume

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An Indone­sian tax offi­cial announced on Fri­day, April 1, 2022, that the gov­ern­ment would begin charg­ing val­ue-added tax (VAT) on cryp­to trans­ac­tions and 0.1 % income tax on cap­i­tal gains from cryp­to invest­ments, start­ing May 1, 2022.

All 11 mil­lion cryp­to investors have been active in Indone­sia, which treats cryp­to assets as com­modi­ties. Accord­ing to the Com­mod­i­ty Futures Trad­ing Reg­u­la­to­ry Agency, last year, cryp­to trans­ac­tions in com­mod­i­ty futures mar­kets expe­ri­enced a $59.8B explo­sion, up 1,000% from 2020s trans­ac­tion volume.

The treat­ment of cryp­to assets as com­modi­ties and not cur­ren­cies accounts for the charg­ing of val­ue-added tax, said the offi­cial, Hes­tu Yoga Sak­sama, at a press con­fer­ence. Sak­sama not­ed that the gov­ern­ment is still busy imple­ment­ing the new tax reg­u­la­tions. The val­ue-added tax charged on cryp­to trans­ac­tions will be low­er than the 11% charged for goods and ser­vices, while the 0.1% charge for invest­ments is on par with tax­es charged on shares.

The Indonesian government needs income

The legal basis for the new cryp­to law came from leg­is­la­tion that passed into law late last year. The Indone­sian par­lia­ment approved a tax law in Octo­ber 2021 to raise VAT, intro­duce a car­bon levy, and can­cel a cor­po­rate tax cut, bring­ing in some much-need­ed income of around 139.3 tril­lion rupi­ah fol­low­ing heavy expen­di­ture in 2020 due to the COVID-19 pandemic.

The Indone­sian Finan­cial Ser­vices Author­i­ty (OJK) assert­ed that finan­cial com­pa­nies are not per­mit­ted to sell cryp­to assets ear­li­er this year. “OJK has strict­ly pro­hib­it­ed finan­cial ser­vice insti­tu­tions from using, mar­ket­ing, and/or facil­i­tat­ing cryp­to asset trad­ing,” the reg­u­la­tor said in Jan. 2022. Cryp­to assets can only be sold on com­modi­ties exchanges, while the trade min­istry is now work­ing on form­ing a sep­a­rate bourse for trad­ing dig­i­tal assets. Cryp­tocur­ren­cies can­not be used as a pay­ment method as they are not cur­ren­cies, said the tax official.

Bankman-Fried lobbying for CFTC to oversee crypto trading

Indonesia’s treat­ment of cryp­to assets as com­modi­ties may give the U.S. gov­ern­ment a hint, as inter-agency wars rage on as to who should over­see the volatile asset class. Sam Bankman-Fried, CEO of FTX, recent­ly lob­bied for cryp­to reg­u­la­tion at a fan­cy par­ty in George­town, Wash­ing­ton, where he argued for the Com­mod­i­ty Futures and Trad­ing Com­mis­sion to play a more sig­nif­i­cant role in the reg­u­la­tion of cryp­to-assets and has called on Con­gress to widen the ambit of the CFTC’s juris­dic­tion to that end. “The Exchanges are com­ing to a con­clu­sion that the last thing they want is to be reg­u­lat­ed by the SEC,” said Patrick McCar­ty of Georgetown’s law school.

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