Custodial service tax

JAKARTA (JP): Tax Director General Fuad Bawazier announced over the weekend that securities safekeeping services offered by commercial banks are subject to 10 percent value added tax (VAT).

A letter on the matter also stipulates that other custodial services, such as securities settlement, securities registration and the distribution of dividends, are exempted from VAT.

Such safekeeping is subject to VAT because the service can also be carried out by other financial agencies, Fuad said in the letter, which was issued to clarify the VAT treatment applied to custodial services offered by banks.

Unlike safekeeping, other custodial services such as securities settlement, securities registration and the distribution of dividends, are offered exclusively by commercial banks under the banking law. "They are, therefore, not subject to VAT," Fuad said. (hen)