New VAT System: Unlocking Opportunities and Embracing Positive Change!
- January 14, 2025
- Posted by: Administrator
- Category: Tax Updates

The Minister of Finance (“MoF”) has issued Regulation (PMK) Number 131 of 2024, which introduces key changes to the treatment of Value Added Tax (VAT). Effective from January 1, 2025, this new regulation aims to create a fairer tax system while adjusting VAT rates and bases for different types of goods and services.
Purpose of the New VAT Regulation
The New VAT regulation seeks to enhance fairness in taxation across society. By adjusting the VAT rates and distinguishing between luxury and non-luxury goods, it ensures a more equitable approach to tax collection. This move is designed to align with modern economic needs and global tax practices.
Key Provisions of the New VAT
One of the most notable changes under the New VAT regulation is the standardization of the VAT rate at 12%, which will take effect on January 1, 2025. This rate adjustment applies to various taxable goods and services, both tangible and intangible.
Differentiating the Tax Base (DPP)
Under the New VAT system, the tax base or Dasar Pengenaan Pajak (“DPP”) is differentiated for luxury and non-luxury goods:
- Luxury Goods: The DPP is based on the selling price or import value. This category includes motor vehicles and other luxury items as regulated in PMK 42/PMK.010/2022 and PMK 15/PMK.03/2023. The import value comprises the cost, insurance, and freight (CIF) value, plus import duty.
- Non-Luxury Goods, Services, and Intangibles: The DPP is calculated by multiplying the import value, selling price, or replacement value by 11/12. This results in an effective VAT rate of 11%.
Transition Period for Luxury Goods
To ensure a smooth transition to the New VAT system, a specific adjustment period has been introduced for luxury goods sold to end consumers:
- January 1, 2025 – January 31, 2025: The DPP for luxury goods is calculated using an “other specified value” of 11/12 of the selling price, effectively applying an 11% rate. VAT payable is determined by multiplying this DPP by 12%.
- Starting February 1, 2025: VAT for luxury goods will be calculated using the full selling price as the DPP, applying the standard 12% rate.
This transition period is designed to provide businesses with sufficient time to adjust their pricing and systems to comply with the new regulations.
Exceptions and Special Cases
Certain taxable goods and services are subject to specific VAT calculations under separate PMK regulations. These include:
- Free gifts
- Personal use items
- LPG 3 kg
- Gold jewelry
- Used motor vehicles
- Cryptocurrency
For these items, VAT is calculated based on their respective regulations and is excluded from the provisions of PMK 131/2024.
Implications of the New VAT
The New VAT regulation represents a significant shift in Indonesia’s tax system, aimed at improving compliance and fairness. Businesses dealing in luxury goods, services, and intangible items must review their tax practices to ensure compliance with the new requirements.
Effective Date
This regulation officially became effective on January 1, 2025, marking a new era in Indonesia’s taxation landscape. The implementation of the New VAT is expected to contribute to a more balanced and efficient tax system for all stakeholders.