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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