No Revision to the HPP Law, VAT Rate to Remain at 12% in 2025

JAKARTA. The increase in the Value-Added Tax (VAT) rate to 12% starting January 1, 2025, is confirmed to take effect. This was stated by Minister of finance Sri Mulyani during a Working Meeting with Commission XI of the House of  Representatives (DPR).

Previously, the provisions regarding the increase in the VAT rate to 12% were regulated in Law (UU) Number 7 of 2021 concerning Harmonisation of Tax Regulations (HPP). 

The law stipulates two phases for the VAT rate increase: from 10% to 11% in April 2022, and then to 12% by no later than 1 January 2025.

However, Sri Mulyani emphasized that this policy must be implemented with proper preparation, including providing clear explanations to the public.

On the same occasion, she also mentioned that the government is offering facilities such as reduced rates and VAT exemptions for the transfer of taxable goods and services in certain sectors.

Some sectors that receive facilities include health, education, and basic needs. In detail, here are some of the VAT facilities regulated in the HPP Law.

• Non-collected VAT to encourage exports and downstream industries
• VAT exemption related to trade and investment agreements with other countries or ratified international conventions.
• VAT exemption related to national vaccination programs
• VAT exemption to improve the quality of education
• VAT exemption related to the construction of places of worship
• Non-collected VAT on government projects financed by foreign grants or loans
• Non-collected VAT to accommodate international agreements
• VAT exemption in the context of handling natural disasters
• Non-collected VAT for the provision of air transport for the public interest 
• VAT exemption for strategic goods, including basic needs and certain services

Previously, the plan to increase the VAT rate to 12% was met with complaints from business operators. Quoting from cnbcindonesia.com, the Indonesian Employers Association (APINDO) argued that the tariff increase was not appropriate, considering the declining purchasing power of the public, as indicated by data from the National Economic Survey conducted by Bank Mandiri. (ASP/KEN)