Credit card's tax treatment

Credit card's tax treatment

JAKARTA (JP): Credit and debit card services provided by
commercial banks are not subject to the 10 percent value added
tax (VAT) because the services for such financing arrangements
are common in the banking industry.

Yesterday, to clear the public's confusion over the payment of
VAT on credit and debit card services, Tax General Fuad Bawazier
confirmed the treatment through a circulation letter.

Services related to credit and debit card issuance are
considered normal practices in the banking industry so they are
not taxable, Fuad said in his circulation letter, which was dated
Aug. 1 but made public only yesterday.

However, Fuad said that transactions of goods or services
using credit or debit cards are taxable.

According to his earlier circulation letter, custodian
services, such as securities settlement, securities registration
and distribution of dividends, are not subject to VAT because
they are also considered standard practices in the banking
industry.

However, securities safekeeping services is subject to the 10
percent VAT because the services are not the exclusive facilities
of banks, he said.(hen)