Indonesia wants to charge 0.1% tax on every cryptocurrency transaction
Indonesia will levy a 0.1% tax on transactions involving cryptocurrencies, Reuters reports. The tax will begin to be collected on May 1st and will be of the “value-added tax” (VAT) class, which are imposed in negotiations involving capital gains with commodities.
This is an important detail: the government of Indonesia allows transactions with cryptocurrencies, but for investment purposes and not as a means of payment. That is, the country classifies crypto-assets as commodities.
“Cryptocurrency assets will be subject to VAT because they are a commodity/commodity as defined by the Ministry of Commerce. They are not a currency,” spokesperson Hestu Yoga Saksama told a news conference. “Then we will impose income tax and VAT.”
Rumors about the taxation of crypto assets in the country started in May of last year. At the time, the spokesperson for the IRS of Indonesia already provided that the taxpayer who profited in the negotiations would have to inform in his declaration and pay the due tax.
According to Reuters, the Financial Services Authority (OJK), a body that functions similarly to the Securities and Exchange Commission (SEC), has already warned investors about the risks of investing in cryptocurrencies, arguing that these assets have no underlying value and prices are highly volatile.
Indonesia’s relationship with cryptocurrencies is turbulent. In October last year, Nahdlatul Ulama (NU), the world’s largest Islamic organization with over 90 million adherents in Indonesia alone, declared that cryptocurrencies violate religious laws and their use should be banned for those who follow the commandments of the group.
The decision came from the NU branch in the province of East Java, which defended the crackdown on cryptocurrencies through a “fatwa” — a religious decree based on Islamic law. The group’s recommendation is that the use of cryptocurrencies be considered a “haram”, that is, prohibited for Islamists.
In January of this year, the Muhammadiyah group, which has 28 million members according to the Britannica encyclopedia, released a fatwa stating that cryptocurrencies are illegal for both investment and payment.
Fatwa is a legal pronouncement issued by an expert in Islamic law when there are doubts about how to proceed in a given situation.
The reason that Islamic organizations banned was the speculative nature of cryptocurrencies, according to the CNBC report. This gives these assets an obscurity (“gharar” in the local term), which would be prohibited by Sharia, Islamic law.