Indonesia is the latest Asian country to announce its intentions to impose a tax regime on all crypto transactions and income tax on capital gains from such investments, Reuters reported,
Indonesia has chosen to place a 0.1% VAT, deducted at source, on every cryptocurrency transaction. The new regime will take effect from May 1, Reuters reported, citing a government tax official, Hestu Yoga Saksama.
Indonesia, India and crypto
With the increasing popularity of cryptocurrencies and cryptocurrency trading activities, various countries around the world are considering how they can tax and regulate the virtual asset industry.
Cryptocurrency adoption in Indonesia has grown significantly since the end of the pandemic, with as many as 11 million Indonesians holding at least one digital asset by the end of 2021.
The Commodity Futures Trading Regulatory Agency estimated that the total value of cryptocurrency transactions in the commodity futures market reached Rs 859.4 trillion ($59.8 billion) in 2021. This is almost a 10x increase in transactions compared to 2020.
Indonesia is the second Asian country to introduce taxes on crypto assets in recent weeks. India also implemented a tax scheme on cryptocurrencies that came into effect on April 1. After months of deliberating on whether crypto should be banned in India, the government opted to impose heavy taxes instead, with one politician saying the high tax is intended to discourage the population from investing in crypto.
By comparison, the taxes to be imposed on Indonesians are far more lenient and more growth-inducing for the local crypto sector.
Why is Indonesia taxing cryptocurrencies?
The country is largely crypto-friendly, and citizens can trade and invest as they wish. However, the Indonesian government has restricted businesses from accepting digital assets as payment methods.
At the press conference where the new taxes were announced, Saksama stated that:
Crypto assets will be subject to VAT because they are a commodity defined by the Ministry of Commerce. They are not a currency.
VAT on cryptocurrencies is well below the country’s 11% general sales tax, but income tax on capital gains is set at 0.1%, which is the same as tax on capital gains. values: 0.1% of the gross value of the transaction.
According to Saksama, the new taxes on crypto assets are provided for in the tax legislation passed last year. However, the absence of a regulatory framework for cryptocurrencies remains a major challenge.
Although the imposition of taxes implies a tacit approval by the government, the lack of real regulation and supervision can hamper the development and adoption of cryptocurrencies in these countries.
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This post Will Indonesia’s Decision To Tax Cryptocurrencies Stifle Local Adoption?
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