Indonesia’s Minister of Finance, Sri Mulyani, set the VAT rate to increase from 10 percent to 11 percent, effective 1 April 2022. Basic goods and services (rice, meat, public transport, etc.) will continue to be exempted.
All transactions apart from basic goods and services as mentioned above will rise to 11% including VAT import and VAT cost of goods transactions.
Indonesia’s parliament recently approved the law as one of the country’s most ambitious tax overhauls of all time. It aims to optimise revenue collection and improve tax compliance after state coffers took a big hit in recent years due to the COVID-19 pandemic. The VAT rate will have a phased increase to 12% in 2025.
Compared to rates applied in other countries, Indonesia’s VAT rate is lower than the global average rate of 15.4 percent and lower compared to the average rate of ASEAN countries (22 percent). The average rate of Organization for Economic Cooperation and Development (OECD) countries is (22 percent), American countries (27 percent), and G20 countries (24) percent.