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Indonesia Pressured to Adopt Friendlier Crypto Taxes Following 60% Trading Drop

Indonesia Commodity Futures Trading Regulatory Agency is now calling for lower taxes as exchanges suffer from lower trading volumes

Photo by Nick Agus Arya / Unsplash

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Indonesia's crypto regulator is calling for the government to reconsider its digital asset tax rates.

Currently, Indonesia classifies cryptocurrency as a commodity and is therefore subjected to value-added tax (VAT) of 0.11% and income tax of 0.1%.

However, Indonesia’s Commodity Futures Trading Regulatory Agency (Bappebti) is now asking the Ministry of Finance to reassess its stance as crypto becomes more integrated in the country's broader economy.

"As crypto is expected to join the financial sector by January 2025, we urge the Tax Director General to review these taxes. It's been over a year since these rules were put in place, and taxes usually get checked every year," said Tirta Karma Senjaya, head of the Bureau of Market Development and Development at Bappebti.

Local crypto exchanges have blamed its 60% drop in trading volumes last year from 2022 on the country's tax regime.

“In January 2024, the revenue from cryptocurrency taxes reached Rp39.13 billion [$2.5 million],” Bappebti said in a report.

“The evaluation is necessary because this regulation has been in place for more than a year. Typically, taxes undergo evaluation annually.”

Senjaya urged stakeholders including Bappebti, the Financial Services Authority (OJK), the Directorate General of Taxes at the Ministry of Finance, associations, and market participants to take a look at current tax structures.

"Moreover, if you transact using stablecoins such as USDT, you will be subject to tax doubling. The number of taxes imposed makes the total amount of taxes paid by investors expensive and has the potential to kill the crypto industry in Indonesia," he added.

Dwi Astuti, a spokesperson for the Ministry of Finance, responded by saying that it "welcomes input from Bappebti and the public" and that the issue of taxes "will certainly be discussed internally."

South Korea is also ushering in new crypto tax laws but recently is now considering a two-year delay in implementing them.

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The virtual asset taxation regime was already pushed back from January 2023 to January 2025. South Korea's ruling People Power Party is now proposing a second delay as a “general election pledge.” Its legislative elections will be held on 10 April 2024.

Approved in December 2022, the new tax reforms see South Koreans with more than 2.5 million Korean won ($1,865) in crypto asset gains will be subject to a 22% tax. The government plans to submit an amendment later this month.

Jeong Jung-hoon, deputy minister of the tax and customs office for South Korea’s Ministry of Economy and Finance, previously said that the National Assembly is weighing up abolishing crypto asset gains from income tax for financial investments.

President Yoon Suk-yeol's administration intends to eliminate taxes on financial investments like stocks and funds to bolster the wealth-building and financial planning efforts of its citizens.

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The People Power Party is now arguing that the approved tax regime would only be possible when a “minimum system for taxation of virtual assets is established.”