Indonesia No Longer Plans to Impose 12 Percent VAT for Luxury Agricultural Products

ID2025-0003 – This report serves as an update to FAS Jakarta’s previous report outlining Indonesia’s plans to impose a 12-percent value-added tax (VAT) for luxury agricultural products (please see GAIN Report ID2024-0053). This would have been a significant change, since agricultural products had not previously been subject to any VAT. Through an official press conference on December 31, 2024, President Prabowo Subianto announced a reversal which effectively means there will be no changes to VAT applications for agricultural goods, although the VAT for certain processed food products previously taxed at 11 percent will remain in place at that rate. Fresh agricultural products that were not previously subject to any VAT will remain exempt.

Indonesia Plans to Impose 12 Percent VAT for Luxury Agricultural Products as Early as January 2025

ID2024-0053 – On December 16, 2024, the Government of Indonesia (GOI) announced the increase in value-added tax (VAT) from the current 11 percent to 12 percent on selected goods and services, effective January 1, 2025. In addition, a separate 12 percent luxury goods sales tax will newly be applied for luxury products intended for high-end Indonesian consumers (luxury VAT). Impacted products include premium beef, pork, fruit, seafood, and specialty rice which historically were not subject to any VAT. Once in force and fully implemented as early as January 2025, the luxury VAT policy will have a significant impact on above-mentioned U.S. agricultural exports to Indonesia, currently valued at approximately $154 million per year. These products already face strong competition from countries such as Australia, New Zealand and the People’s Republic of China which offer competitive prices and have duty-free access or lower tariffs under free trade agreements.