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)