Government to impose 12% VAT starting next year
As a part of Indonesia’s Tax Harmonization Law, the government will increase value-added tax (VAT) to 12% on January 1, 2025, from the current 11%. This adjustment is part of gradual increase in the 2021 Tax Harmonization Law, which allows the increase up to 15&. It was previously raised from 10% to 11% on April 1, 2022. Indonesia’s rate had stood at 10% for many years.
The rise in VAT comes at the right time given the upcoming administration will require a larger revenue pool to fund a myriad of the president-elect campaign promises. Furthermore, rising VAT appears to be a logical choice, given that Indonesia’s current rate is moderate compared to the average OECD members' rate at 19% and BRICS members at 17%. Indonesians will have to pay more for most goods, including buying clothes, eating at restaurants, playing video games or paying movie subscription in 2025.