Government Increases Value Added Tax (VAT) to 12% from 2025
The Indonesian government has officially announced an increase in Value Added Tax (VAT) from 11% to 12% effective January 1, 2025. However, this new VAT rate will only apply to luxury goods that are also subject to Luxury Goods Sales Tax (LGST). The announcement was made by President Prabowo Subianto and Minister of Finance Sri Mulyani at the Ministry of Finance office last Tuesday.
President Prabowo Subianto clarified that the VAT increase will only affect luxury goods and services, targeting those in the upper-middle and affluent classes. Four categories of luxury goods will be subject to the new 12% VAT rate:
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LGST 20%: Luxury housing such as villas, apartments, and townhouses priced at Rp30 billion or above.
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LGST 40%: Hot air balloons, other lighter-than-air aircraft, and certain types of ammunition.
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LGST 50%: Military aircraft, helicopters, passenger aircraft, artillery, revolvers, pistols, and other firearms.
- LGST 75%: Luxury yachts and other pleasure boats, except those used for public transportation or state purposes.
Yachts used for private pleasure will be subject to the 12% VAT, excluding those used for state purposes or public transportation and tourism businesses.
Calculation of Tax on Luxury Goods after 12% VAT and LGST
For instance, if a luxury house is sold at Rp30 billion, the taxes would be calculated as follows:
- VAT: 12% of Rp30 billion = Rp3.6 billion
- LGST: 20% of Rp30 billion = Rp6 billion
- Total price paid by the buyer: Rp30 billion + Rp3.6 billion + Rp6 billion = Rp39.6 billion
