Indonesia has been charging VAT on crypto transactions from 1 May 2022. The government also plans to impose a capital gains tax on the sale of crypto assets.
In Indonesia, traders can exchange crypto assets as commodities but may not use them as currencies (i.e. as a means of payment).
Indonesia’s new crypto VAT rules are part of broader VAT reform to enhance revenue collection.
Crypto and VAT: We Need More Clarity
The distinction between cryptocurrencies and crypto-assets may seem like a highly theoretical, geeky question. But there are significant practical implications.
For example, crypto platforms in India have complained that there is too much ambiguity about how crypto is taxed. The precise status of crypto-assets, and what kinds of activity count as a ‘taxable supply’, ultimately decide who is liable to pay tax.
If you mine or exchange crypto-assets or hold currencies like Bitcoin in a digital wallet, you need to know your precise tax obligations.
Firstly, you don’t want to pay any more VAT or capital gains tax than you are obliged to pay. And secondly, you don’t want to find yourself liable for penalties, fines and criminal charges because you misunderstood your tax obligations. As the regulations around crypto are rapidly changing, there’s a real danger of confusion and accidental noncompliance.
Don’t Compartmentalise your VAT Compliance
As crypto is a strange new world to many, there’s the temptation to treat crypto transactions differently from day to day payments. However, as regulators look to regulate crypto, businesses need to appreciate that their Bitcoin and Ethereum transactions are likely to incur real-world tax obligations. Even if you do all your business in the metaverse, you may find the local tax office knocking at your door.
To stay ahead of your digital VAT obligations, you need an integrated global VAT solution that considers your whole business. Give us a shout for a holistic global VAT solution that ensures you are always 100 per cent VAT compliant everywhere you do business.