Fiscal Incentive 2025 Not Contradictive With 12 Percent VAT Policy For Luxury Goods

Luxury items (photo: between)

JAKARTA - The government is in the process of finalizing the provision of fiscal incentives next year, including an analysis of its impact on related sectors and the economy as a whole.

The fiscal incentives in question include incentives for the Government-borne Luxury Goods Sales Tax (PPnBM) (DTP) for the purchase of electric cars and VAT DTP for the property sector.

Secretary of the Coordinating Ministry for the Economy Susiwijono Moegiarso said that the provision of fiscal incentives in 2025 does not conflict with the policy of increasing VAT rates to 12 percent for luxury goods next year.

According to Susi, this incentive is specifically carried out in sectors that have a big contribution to the economy and have a direct effect on people's welfare and have been running for the last few years so this is not a new policy.

"This is not for certain sectors whose contributions are large to the economy and that touch the people, so if it's a scheme that has been running for several years, it's for several fiscal incentives that have been running before PPN DTP, PPnBM DTP has been rolled out again and indeed it has been allocated in 2025," he said after the Indonesia SEZ Business Forum 2024 event, Monday, December 9.

In addition, Susi said that the Government is conducting a study related to fiscal incentives next year to compensate for the increase in value added tax rates (VAT) to 12 percent in 2025.

"It is being studied to reduce the impact of ppn 12 percent, we are proposing several fiscal incentive schemes, especially DTP VAT and DTP PPnBM," he said.

However, Susi has not been able to provide detailed information regarding when the technical rules will be issued by the government. Meanwhile, the technical regulations will be issued in the form of a Minister of Finance Regulation (PMK) which is being prepared.

To note, the increase policy is contained in Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP) in Article 7 paragraph (1), the 12 percent VAT rate is valid no later than January 1, 2025, after the increase in VAT rates from 10 percent to 11 percent in April 2022.

Previously, President Prabowo Subianto said that he would continue to increase the VAT rate to 12 percent in 2025, which would be specifically for luxury goods products.

"VAT is a law, yes we will implement it, but selective. Only for luxury goods," he said when giving a press statement, Friday, December 6.