DIGIVESTASI - VAT Rises to 12 Percent for Luxury Goods Starting 2025, Applies Alongside Luxury Sales Tax, Effective January 1, 2025, the government will increase the Value Added Tax (VAT) rate from 11 percent to 12 percent for luxury goods. Items such as private jets, residences valued at IDR 30 billion or more, and yachts fall into this category.

However, luxury goods have long been subject to the Luxury Sales Tax (LST) since July 1, 1984, under Law Number 8 of 1983. This regulation was later amended through Law Number 7 of 2021 on the Harmonization of Tax Regulations (HPP Law). Consequently, luxury goods are subject to two types of taxes: 12 percent VAT and LST.

Dwi Astuti, the Director of Public Education, Services, and Public Relations at the Directorate General of Taxes under the Ministry of Finance, explained that VAT and LST have distinct characteristics. VAT is applied to every transaction made by VAT-registered businesses, whereas LST is imposed only once—either at the initial delivery by the manufacturer to the buyer or upon the import of goods into Indonesia.

“Article 5, paragraph (1) of the HPP Law states that luxury goods, in addition to VAT, will also be subject to LST once, either at the first delivery or upon importation,” Dwi stated on Wednesday (1/1/2025).

The LST rates for luxury goods are determined based on the category of goods, as outlined in Ministry of Finance Regulation (PMK) Number 15 of 2023 and PMK Number 42 of 2022. For instance, luxury residences such as houses, apartments, condominiums, or townhouses with a selling price of IDR 30 billion or more are subject to an LST rate of 20 percent.

Example Calculation of VAT and LST

Dwi provided an illustration of the calculation:

Rora purchases a luxury house valued at IDR 100 billion from a developer who is a VAT-registered business. For this transaction, both VAT and LST are applicable, calculated as follows:

• VAT:
  Taxable Base (DPP) x VAT Rate 12%
  IDR 100 billion x 12% = IDR 12 billion

• LST:
  Taxable Base x LST Rate 20%
  IDR 100 billion x 20% = IDR 20 billion

Thus, the total amount Rora must pay includes the house price (IDR 100 billion), VAT (IDR 12 billion), and LST (IDR 20 billion), totaling IDR 132 billion.

If Rora, as a VAT-registered business, later sells the house for IDR 200 billion, the transaction will only be subject to 12 percent VAT. The calculation would be:
IDR 200 billion x 12% = IDR 24 billion.

This policy is expected to enhance state revenues, particularly from the luxury goods sector.

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