Interested in Crypto Assets? Here are the Tax Terminology!
By Rendy Brayen Latuputty, Directorate General of Taxes employee
Is Buddy Cuan a cryptocurrency investor or trader? Have you ever considered how crypto assets will be taxed? Want to pay your taxes but aren't sure what the law says?
The above questions frequently occupy the minds of Indonesian crypto asset players. In fact, the country's development of the world of crypto assets has been extraordinary in recent years. As an example, the transaction value of digital assets based on blockchain technology in 2020 is only IDR 69.9 trillion. The value will more than double to Rp 859.4 trillion by 2021. The transaction value then reached IDR 130.2 trillion from January to March 2022, with 11.2 million investors (Ministry of Trade, 2022).
However, all of the above concerns appear to have been addressed. Yes, the government has just issued a regulation governing the taxation of crypto assets. Minister of Finance Regulation Number 68/PMK.03/2022 Concerning Value Added Tax and Income Tax on Crypto Asset Trading Transactions (PMK-68/PMK.03/2022). The regulation is expected to provide crypto asset players with tax justice, legal certainty, and simplicity.
The VAT and PPh objects
It should be noted that the taxation of crypto assets is not a new type of tax. The imposition of taxes is still based on the types of taxes that have previously existed, such as Value Added Tax (VAT) and Income Tax (PPh). Only the mechanism for collecting taxes is regulated here. Of course, earlier to provide legal certainty and simplicity.
On this occasion, we will focus on taxes on crypto asset trading transactions. Buying and selling crypto assets with fiat currencies, swapping crypto assets, and exchanging crypto assets for other goods/services are all examples of trading transactions. We will not discuss the taxes levied on cryptocurrency exchanges or cryptocurrency miners.
Crypto assets are intangible commodities in the form of digital assets that use cryptography, peer-to-peer networks, and distributed ledgers to regulate the creation of new units, verify transactions, and secure transactions without interference from third parties, according to Article 1 number 14 PMK-68/PMK.03/2022. According to this definition, crypto assets meet the criteria for VAT as Intangible Taxable Goods (BKP) as defined in Article 4 paragraph (1) of Law Number 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods s.t.d.t.d. Law Number 7 of 2021 concerning Harmonization of Tax Regulations (VAT Law and its amendments).
Then, according to Article 5 PMK-68/PMK.03/2022, the submission of crypto assets is subject to VAT at a certain rate, namely 1% (if the transaction is carried out through an exchanger registered with the Commodity Futures Trading Supervisory Agency (Bappebti), Ministry of Trade) or 2% (if the transaction is carried out through an exchanger that is not registered with CoFTRA) of the VAT rate as stipulated in the VAT Law and its amendments). In other words, the VAT rate on the delivery of crypto assets is currently 0.11 percent or 0.22 percent of the transaction value, depending on whether the transaction is carried out through a CoFTRA-registered exchange or not.
The income generated by trading crypto assets is taxable. This is due to the existence of additional economic capacity that meets the definition of income as defined in Article 4 paragraph (1) of Law No. 7 of 1983 concerning Income Tax s.t.d.t.d. Law No. 7 of 2021 concerning Harmonization of Tax Regulations (PPh Law and its amendments).
Furthermore, according to Article 21 PMK-68/PMK.03/2022, sellers of crypto assets are subject to Article 22 Final Income Tax on income from trading crypto assets, whether buying and selling with fiat currency, swaps, or exchanging for other goods/services. The amount is 0.1 percent (if the transaction is made through a CoFTRA-registered exchange) or 0.2 percent (if the transaction is made through a non-CoFTRA-registered exchange) of the transaction value of crypto assets.
Article 22 The final VAT and PPh mentioned above must be collected by exchangers who act as intermediaries in crypto asset trading transactions. The exchanger is required to provide proof of withholding/collection of unification to the transacting parties, in this case the buyers and sellers of crypto assets, for this collection. Furthermore, by the 15th of the following month, the exchanger must deposit the Final Article 22 VAT and PPh to the state treasury. The exchanger must then file a Tax Return (SPT) for the 1107 Put (Modified) VAT Period and a Unification PPh Period no later than 20 days after the tax period ends (the 20th of the following month).
Buying and selling crypto assets with fiat currency, swapping crypto assets, and exchanging crypto assets for other goods/services are all examples of crypto asset trading transactions. As a result, VAT is levied on parties who receive (purchase) crypto assets. Then, pursuant to Article 22 Final Income Tax, the party who releases (the seller) of crypto assets is taxed. To make it easier to understand, let's go over each point individually with case examples.
Purchase and sell fiat currency
The transaction value in buying and selling crypto assets with fiat currency is the amount of money paid by the buyer of the crypto asset. If the transaction is made in a foreign currency, the value is converted into rupiah using the minister of finance's set exchange rate (KMK rate). In the following case examples, the rupiah currency will be used in the transaction for simplicity.
Andri Kenz owns one Botcoin (BOTC), while Dino Salmanan owns rupiah, which is stored in an e-wallet provided by the WarungKripto exchange. On April 18, 2022, Andri Kenz sold 0.5 BOTC to Dino Salmanan via the WarungKripto platform at a price of 1 BOTC = Rp1 billion. WarungKripto is a CoFTRA-registered exchanger.
WarungKripto is required to collect Rp. 550 thousand in VAT from Dino Salmanan for this transaction (0.11 percent x 0.5 BOTC x Rp. 1 billion). WarungKripto is also required to collect IDR 500 thousand in Article 22 Final Income Tax from Andri Kenz (0.1 percent x 0.5 BOTC x IDR 1 billion). Then, in order to collect VAT and PPh Article 22 Final, WarungKripto must issue proof of unification withholding/collection, deposit it in the state treasury by May 15, 2022, and report the 1107 Put (Modified) VAT Period SPT and Unification PPh Period SPT by May 20, 2022.
The transaction value in swap transactions (exchanges) between crypto sets is the value of each crypto asset submitted by the transacting parties. This is the value of crypto assets converted into rupiah currency based on the value determined by the futures exchange that trades crypto assets or the value in the exchange's system, which is applied consistently.
The two parties who transact in this swap transaction are the ones who receive and release crypto assets. As a result, both parties are subject to VAT and Article 22 Final Income Tax.
Continuing with the previous example, on April 20, 2022, Andri Kenz exchanged 0.3 BOTC, which he still has, for 30 Othoreum (OTH) owned by Punda Sjahrir via the WarungKripto platform. On April 20, 2022, the value of one BOTC and one OTH converted into rupiah currency is Rp. 1 billion and Rp. 10 million, respectively.
For this transaction, WarungKripto must collect IDR330 thousand (0.11 percent x 30 OTH x IDR10 million) in VAT and IDR300 thousand (0.1 percent x 0.3 BOTC x IDR1 billion) in Article 22 Final Income Tax from Andri Kenz. WarungKripto, on the other hand, is required to pay Punda Sjahrir IDR 330 thousand (0.11 percent x 0.3 BOTC x IDR 1 billion) in VAT and IDR 300 thousand (0.1 percent x 30 OTH x IDR 10 million) in PPh Article 22 Final. Then, in order to collect VAT and PPh Article 22 Final, WarungKripto must issue proof of unification withholding/collection, deposit it in the state treasury by May 15, 2022, and report the 1107 Put (Modified) VAT Period SPT and Unification PPh Period SPT by May 20, 2022.
Other Goods/Services in Exchange
In practice, crypto assets function similarly to a medium of exchange. Crypto assets can be traded for other goods and services. The value of the transaction in this case is the value of the crypto asset transferred (transferred) to the account of another party. This is the value of crypto assets converted into rupiah currency based on the value determined by the futures exchange that trades crypto assets or the value in the exchange's system, which is applied consistently.
Continuing the previous example, on April 22, 2022, Andri Kenz traded his remaining 0.2 BOTC for a Tasle car sold by PT Tasle Cheap Banget. On April 22, 2022, the value of 1 BOTC converted into rupiah currency is Rp. 1 billion. Andri Kenz transferred 0.2 BOTC to PT Tasle Cheap's e-wallet. WarungKripto has truly provided.
WarungKripto is required to collect Rp220 thousand in VAT from PT Tasle Cheap Banget for this transaction (0.11 percent x 0.2 BOTC x Rp1 billion). WarungKripto is also required to collect IDR 200 thousand in Article 22 Final Income Tax from Andri Kenz (0.1 percent x 0.2 BOTC x IDR 1 billion). Then, in order to collect VAT and PPh Article 22 Final, WarungKripto must issue proof of unification withholding/collection, deposit it in the state treasury by May 15, 2022, and report the 1107 Put (Modified) VAT Period SPT and Unification PPh Period SPT by May 20, 2022.
So, what about the taxes on the Tasle's delivery? VAT is payable upon delivery of the Tasle car in accordance with the provisions of VAT legislation. Then, on the income from the sale of Tasle cars, PT Tasle Cheap Really is subject to income tax in accordance with the provisions of the income tax laws and regulations.
As crypto-asset participants, we certainly appreciate this agreement, which provides justice, legal certainty, and simplicity. There will be no more worries because we are now in a "aquarium" where the water is clear and there is good governance. Most importantly, we can contribute to the development of Indonesia, of course through crypto assets!
*) This article represents the author's personal viewpoint and does not represent the viewpoint of the institution where the author works.