Tax Treatment of Crypto Asset Trading

Date of Post

May 11, 2022

Written by

lemonadecares

On 30 March 2022, the MoF issued Regulation No.68/PMK-03/2022 (“PMK-68”) that outlines the VAT and Income Tax treatment of Crypto Asset trading transactions.

Crypto Asset (CA) is defined as an intangible commodity in the form of digital asset, using cryptography, peer-to-peer network, and distributed ledger, to manage the creation of new units, verify transactions, and to secure a transaction without any involvement of other party.

There are various parties involved in CA trading, namely:

  • CA Seller ‒ an individual or company who sells or trades the CA.
  • CA Buyer ‒ an individual or company who receives the CA and pays for it (or should have received/paid for the CA).
  • CA Physical Trader ‒ a party that is authorised by the commodity futures trading regulator, to carry out CA transaction for themselves or to facilitate a CA Seller or CA Buyer transaction. This trader can be in the form of ecommerce VAT Collectors (Penyelenggara Perdagangan Melalui Sistem Elektronik/”PPMSE”) who provide an electronic channel for CA trading.
  • CA Miners ‒ an individual or company who verifies CA transaction for a fee in the form of CA, either individually or in a mining pool.

VAT Treatment

VAT is due on the delivery of:

  1. Taxable intangible asset in the form of CA within the Indonesian customs area. This delivery can be carried out using fiat money, swapping a CA for another CA, and/or swapping CA for other assets/goods or services.
  2. Taxable service in the form of provision of electronic channel for CA trading by PPMSE.
  3. Taxable service in the form of CA transaction verification services and/or management service of a mining pool by CA Miners.

Any transaction value carried out using fiat money in non-Rupiah currency must be converted using MoF rate at the time of VAT collection. Any transaction value carried out using a CA is converted into Rupiah based on the value set by the CA futures exchange, or the value in the PPMSE system, which is applied consistently.

Trading between CA Buyers and CA Sellers

The VAT is collected, paid and reported by PPMSE based on a Final VAT rate of:

  1. 1% of the general VAT rate (effectively 0.11%) multiplied by the CA transaction value, if the PPMSE is a CA Physical Trader.
  2. 2% of the general VAT rate (effectively 0.22%) multiplied by the CA transaction value, if the PPMSE is not a CA Physical Trader.
Transaction methodTransaction valueTiming of VAT collection
Using fiat moneyThe amount of money paid by CA Buyer (not including VAT)Upon receipt of payment from CA Buyer by PPMSE
Swapping CA for
another CA
The value of each CA exchanged by the transacting parties (not
including VAT)
Upon the exchange of CA to the other party’s account
Swapping CA for other assets/goods or servicesThe value of each CA exchanged by the transacting parties (not
including VAT)
Upon the transfer of CA to the other party’s account

PPMSE must prepare a VAT collection slip in the form of a Document deemed equal to the Unification Tax Withholding/Collection Slip. This document must contain:

  • Name and Tax ID of the PPMSE;
  • Name and Tax ID of the withheld/collected party (Tax ID is not required if the withheld/collected party is a foreign tax subject);
  • Unique transaction number related to the income withheld;
  • Tax imposition base;
  • VAT and Income Tax rate and amount;
  • Status of Unification Tax Withholding/Collection Slip.
Read More:  VAT Changes under the HPP Law RE: Non-VATable goods and services that are subject to Regional Taxes

If the PPMSE reside or domicile outside the customs area, they can be appointed as VAT Collector based on the prevailing regulation.

If the CA Seller is a VATable Entrepreneur (Pengusaha Kena Pajak/PKP):

  • The CA Seller must issue a VAT Invoice on the CA delivery.
  • VAT Collection slip prepared by PPMSE is deemed as Document equal to VAT Invoice.
  • CA Seller does not carry out VAT collection on CA delivery through PPMSE system.
  • CA Seller report the VAT collected by PPMSE in their VAT Return as VAT collected by a VAT Collector.
  • CA Seller cannot credit the Input VAT related to the CA delivery.

Delivery of taxable service in the form of provision of electronic channel for CA trading by PPMSE

A PPMSE must at least facilitate CA transaction carried out using fiat money, swapping CA with another CA, and/or e-wallet services (i.e. consisting of deposit, withdrawal, transfer of CA to other party’s account and providing and/or managing CA storage media).

VAT on these services is collected by the PPMSE and imposed based on the commission or fee in any form, including the one received by PPMSE to be forwarded to CA Miners. The regular VAT rate of 11% applies, and the PPMSE must issue a VAT Invoice for their services. The commercial invoice issued for these services is deemed as Document equal to VAT Invoice.

Delivery of taxable service in the form of CA transaction verification services and/or management service of a mining pool by CA Miners

VAT on these services is collected and paid by the CA Miners based on a Final VAT rate of 10% of general VAT rate (i.e. effectively 1.1%) of CA value received by CA Miners, including CA received from CA system (block reward).

The CA Miners may issue VAT Invoice on the delivery of these services under the Retailer (Pedagang Eceran) regime which allows for the omission of the buyer’s name and seller’s signature in the VAT Invoice.

Read More:  New Regulation on Importation of Battery-Based Electric Motorized Vehicles

Income Tax treatment

Income received or earned by CA Seller, PPMSE, or CA Miner are all subject to Income Tax.

Any transaction value carried out using fiat money in non-Rupiah currency must be converted using MoF rate at the time of payment received from the buyer (if transaction is using fiat money) or when income is received or earned (if transaction is using other than fiat money or CA). Any transaction value carried out using a CA is converted into Rupiah based on the value set by the CA futures exchange, or the value in the PPMSE system, which is applied consistently.

Income Tax on CA Seller

CA Seller income from CA transaction is subject to the Article 22 Final Income Tax of 0.1% of transaction value (not including VAT and Luxury Goods Sales Tax). If the PPMSE is not a CA Physical Trader, the Article 22 Final Income Tax rate is 0.2%. This tax is also applicable for income from CA transaction either received or earned by PPMSE or CA Miners acting for themselves through electronic channel provided by other PPMSE.

The Article 22 Income Tax is collected upon payment from the buyer, exchange of CA, and/or upon receipt of payment of other income by PPMSE. The tax is collected, paid and reported by PPMSE. A PPMSE must prepare the Article 22 Income Tax collection slip in the form of Document deemed equal to Unification Tax Withholding/Collection Slip. PPMSE that does not comply with these obligations will be penalised based on the prevailing tax regulations. If a foreign PPMSE is appointed as a VAT Collector, they are also appointed as an Article 22 Income Tax collector.

A PPMSE is exempted from collection obligation if they only provide an e-wallet service, bring together buyers and sellers, and/or not facilitating CA trading transactions. The Article 22 Final Income Tax on CA Seller income from CA transaction through this type of PPMSE must be self-remitted by the CA Seller.

CA Seller is exempted from Article 22 Income Tax if they are a foreign taxpayer residing in a tax treaty country and the taxing right is not with Indonesia. To enjoy this exemption, they must be able to submit a certificate of domicile to the domestic PPMSE.

Income Tax from the provision of electronic channel for CA transaction by PPMSE

The scope of income of PPMSE includes income from the provision of electronic channel for CA transaction, deposit service, withdrawal service, transfer of CA between e-wallets, provision of and/or managing of CA storage media or e-wallet, and other services related to CA. These incomes are subject to normal Income Tax rates.

Income Tax on income received or earned by CA Miners in relation to CA

The scope of income of CA Miners includes income from CA system in the form of block reward, transaction verification fee, other income from CA system and/or any other income. These incomes are subject to Article 22 Final Income Tax of 0.1% which must be self-remitted by the CA Miners.

Tags:

Table of Contents

Related Articles

An Update on VAT Invoicing

An Update on VAT Invoicing

On 31 March 2022, the DGT issued Regulation No. PER-03/PJ/2022 (“PER-03”) regarding the VAT Invoice arrangements which became effective on 1 April 2022. PER-03 mainly serves as a compilation of several previous regulations related to VAT Invoicing with several...

read more
Tax treatment of Fintech activities

Tax treatment of Fintech activities

On 30 March 2022, the MoF also issued Regulation No. 69/PMK.03/2022 (“PMK-69”) stipulating the Income Tax treatment of interest income in peer-to-peer (P2P) lending, as well as the VAT treatment of Financial Technology (“Fintech”) activities. Fintech is an activity...

read more
Share This