Effective Now: 12% VAT for Luxury Goods, 11% for Non-Luxury Goods

The government has set a Value-Added Tax (VAT) rate of 12% on the import or transfer of taxable goods (BKP) and/or taxable services (JKP) classified as luxury items.

Luxury items subject to this tax include motor vehicles and non-motor vehicles that were previously subject to Sales Tax on Luxury Goods (STLG), such as luxury residences priced at IDR 30 billion, hot air balloons, and luxury yachts.

This policy is stipulated in the Minister of Finance Regulation (PMK) Number 131 of 2024, issued on December 31, 2024, and effective from January 1, 2025.

Alternative Tax Base

For the period of January 1 to January 31, 2025, the VAT on luxury goods will be calculated by applying the 12% rate to an alternative tax base (DPP) of 11/12 of the selling price.

Starting February 1, 2025, the VAT liability will be calculated directly by applying the 12% rate to the full selling price or import value.

Meanwhile, for the import and transfer of taxable goods (BKP) and/or taxable services (JKP) other than luxury goods, a 12% VAT will be applied to an alternative tax base of 11/12 of the selling price starting January 1, 2025, and onwards.

Consideration of Fairness Aspects

For non-luxury taxable goods (BKP) and taxable services (JKP), the alternative tax base is set at 11/12, so the effective VAT rate remains at 11%.

BKP/JKP	VAT Rate	Tax Base	Effective Date
Luxury Goods	12%	11/12 of the selling price	1 January-31 January 2025
Luxury Goods	12%	Selling Price /Import Value	Starting 1 February 2025
Non-Luxury Goods	12%	11/12 of the selling price	Starting 1 January 2025

Meanwhile, for taxable goods (BKP) and taxable services (JKP) that were previously subject to VAT with an alternative tax base (DPP) or a specific amount, the existing provisions will continue to apply.

For example, the use of an alternative tax base for the transfer of goods for personal use or free distribution is regulated in PMK 121/2015.

Other examples include specific VAT rates for parcel delivery services or freight forwarding services, as outlined in PMK 71/PMK.03/2022, or insurance agent services regulated by PMK 67/PMK.03/2022.

In its consideration, the government explained that this policy was issued to ensure fairness to the public.

Previously, under the Tax Regulation Harmonization Law (HPP), the government was required to increase the VAT rate to 12%, without any exceptions. (ASP/KEN)