New VAT Regulations and Luxury Goods Taxation Changes in 2025

• On 29 October 2021, the Minister of Finance enacted Law No. 7 of 2021 on Tax Regulations Harmonization, amending VAT rates to 11% from 1 April 2022 and 12% from 1 January 2025
• Concerns about the VAT rate increase’s impact on the economy led to the issuance of Minister of Finance Regulation No. 131/2024 on 31 December 2024
• Under this regulation, the VAT rate increase to 12% starting 1 January 2025 affects all delivery and import of taxable goods and services
• The 12% VAT rate is specifically applicable to luxury motorized vehicles and other luxury goods subject to the Sales Tax on Luxury Goods, with other goods and services effectively charged at 11%
• The HPP Law also amends Law No. 42 of 2009, impacting all goods and services previously under the 11% VAT rate
• The president confirmed on 31 December 2024 that the 12% VAT rate increase primarily affects luxury goods delivery
• From 1 January 2025, luxury goods will incur a 12% VAT on the selling or import price, while other goods and services will have a 12% VAT calculated on an alternative base, effectively making it 11%
• Businesses must comply with the new administrative requirements under the updated VAT regulations

Source: insightplus.bakermckenzie.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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