12% VAT Implementation on January 1 2025 in Indonesia

On November 14, 2024, Indonesia’s Finance Minister announced that the new 12% value-added tax (VAT) will be implemented starting January 1 2025, in accordance with the 2021 taxation law. Despite calls for a delay, the Minister stated that current budget and fiscal conditions do not permit a postponement. She emphasized the need to increase state revenue to support post-pandemic economic recovery and highlighted the importance of maintaining a healthy state budget to address potential financial crises and geopolitical tensions. The government had previously agreed on a gradual VAT increase, moving from 10% to 11% in April 2022, with the final increase to 12% originally scheduled for 2025.

Indonesia’s Finance Minister announced on Thursday, 14 November 2024, that the new 12% value-added tax (VAT) will take effect on January 1 2025, in accordance with the 2021 taxation law. Despite increasing calls for a delay, she informed lawmakers that the current budget and fiscal conditions do not allow for a postponement.

The Finance Minister emphasized the necessity of raising state revenue to support the post-pandemic economic recovery, stating that tax policies, including the new VAT, have been carefully crafted with consideration for public health and basic needs. During a hearing with the House of Representatives’ Commission XI, she highlighted the importance of maintaining a “healthy” state budget to mitigate potential financial crises and address ongoing geopolitical tensions.

Previously, the government and parliament had agreed to a gradual VAT increase: from 10% to 11% in April 2022, with the final increase to 12% planned for 2025.