Sri Mulyani Announces the Increase of VAT Rate to 12% Starting January 1, 2025

Ensuring Fiscal Stability Amid Economic Challenges

On Monday, December 16, 2024, the Minister of Finance of Indonesia, Sri Mulyani Indrawati, announced a significant reform in Indonesia’s taxation system: the Value Added Tax (VAT) will be raised to 12%, effective January 1, 2025. This decision is part of broader fiscal reforms mandated by Law No. 7/2021 on Tax Regulation Harmonization, aimed at ensuring long-term fiscal sustainability and strengthening state revenue.

Sri Mulyani emphasized that this VAT increase is crucial for maintaining Indonesia’s fiscal stability, especially amidst growing budget deficits and global economic uncertainties due to the pandemic and geopolitical tensions. This tax reform aims to support government spending in infrastructure, social programs, and the green economy, contributing to the nation’s growth and prosperity.

While the government views this VAT increase as necessary to sustain the country’s financial health, Sri Mulyani also assured that the government would continue to protect households and businesses by exempting certain essential goods from the 12% VAT rate. In other words, basic goods will remain VAT-free to prevent a heavier burden on lower-income groups.

Goods Exempt from the 12% VAT

To mitigate the impact of the VAT increase on society, certain essential goods will be exempted from the 12% VAT, including:

1. Staple Foods: Such as rice, cereals, and tubers like cassava.
2. Vegetables and Fruits: Including fresh vegetables, fruits, and spices that are important for nutrition.
3. Dairy Products: Including milk and yogurt, which are essential sources of nutrition.
4. Animal Protein: Such as fresh meat, fish, and eggs—primary sources of protein for families.
5. Other Essential Goods: Such as tempeh, tofu, and spices used in daily cooking.

Sri Mulyani’s decision to exempt these goods shows the government’s effort to shield society from the direct impact of the VAT increase, ensuring that basic living costs remain affordable.

Reanda Bernardi’s Role in Facing VAT Increase

With the 12% VAT rate being implemented next year, companies need to prepare for its impact. This VAT increase will undoubtedly affect cost structures, pricing strategies, and profitability, presenting both challenges and opportunities for many sectors.

Reanda Bernardi, as a leading professional services firm, plays a crucial role in helping businesses face these challenges. Through VAT impact simulations, strategic tax planning, and compliance services, Reanda Bernardi can assist businesses in minimizing the negative impact of the VAT increase on their operating costs. By providing clear guidance on how to optimize finances while adhering to new tax regulations, Reanda Bernardi helps businesses stay competitive and avoid potentially costly mistakes.

Reanda Bernardi’s expertise in financial planning and tax compliance will be invaluable in ensuring that companies adapt to this change, while also seizing strategic opportunities to improve efficiency, reduce costs, and maintain profitability.

Full List of Details: Launch Economic Incentive Package, Government Ensures Justice and Public Interests Remain Protected

For more information, visit the official publication at: Launch Economic Incentive Package