Indonesia Watchdog Considers Changes to Double Taxation on Digital Currencies: Report

Indonesia’s commodity watchdog is keen to change the status of digital currency tax regulations before Southeast Asia’s digital currency adoption levels surge.

According to local news reports, the Commodity Futures Trading Regulatory Authority (Bappebti) has asked Indonesia’s Ministry of Finance to evaluate the current tax regime for digital currencies to reflect the country’s embrace of digitalization.

Bafevti officials are calling for a reduction in the tax burden on domestic virtual currency service providers and traders. Currently, each virtual currency transaction is subject to a Value Added Tax (VAT) of 0.11% in addition to the existing 0.1% income tax.

Indonesian authorities imposed VAT requirements in mid-2022 following the closure of several major exchanges in the country. However, under local law, the tax system is expected to be assessed annually to determine economic adequacy, which is why Bappebti is requesting an assessment.

“Because this regulation has been in effect for over a year, an evaluation is necessary,” the report said. “Typically, taxes are assessed annually.”

Tirta Karma Senjaya, Head of Market Development at Bappebti, pointed out that a reassessment of the tax regime is necessary, given that the asset class is expected to play a significant role in the local economy.

“Because later cryptocurrencies will become part of the financial sector,” Senjaya said at a financial event in Jakarta. “We look forward to a commitment from the Internal Revenue Service to assess these taxes.”

Another reason to re-evaluate the tax system is that Indonesian authorities have proposed classifying digital currencies as securities rather than commodities. Bappebti is expected to hand over the regulatory reins to the Financial Services Authority (OJK), a move expected to be completed around 2025.

The combination of VAT and income tax on digital assets has added a small fortune to the government. In January alone, digital currency taxable income surged past $2.3 million amid rising domestic trading indicators.

Reduce the tax burden but strengthen regulations

While Bappebti is working to ease the tax burden on digital currencies, other regulators are tightening their grip on the local digital asset ecosystem.

Indonesian regulators, still recovering from the unfortunate explosion of a major digital asset company, have introduced new rules to protect investors. According to the new regulations, two-thirds of the boards of directors of digital asset service providers must be Indonesian citizens residing in Indonesia.

Indonesian regulators have launched a nationwide digital currency exchange, requiring all exchange operators to rely on third-party services to store customer funds to ensure overall uniformity.

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