Tax Office gathers industry input on gold ETF tax scheme

Several associations have already come to our office. We discussed it, and we tried to understand together what business processes occur when this ETF is carried out.

Jakarta (ANTARA) - The Directorate General of Taxes (DJP) at the Ministry of Finance is gathering input from industry players regarding the tax scheme to be applied to gold-based exchange traded fund (ETF) transactions.

“Several associations have already come to our office. We discussed it, and we tried to understand together what business processes occur when this ETF is carried out,” said Inge Diana Rismawanti, Director of Tax Dissemination, Services and Public Relations at the DJP, during the inauguration of the Indonesia Bullion Market Association (IBMA) in Jakarta on Thursday.

She said that to date, a special tax scheme for gold ETFs is still under discussion, both in terms of final Income Tax (PPh) and Value Added Tax (VAT).

According to Inge, there is a proposal for gold ETF transactions to be subject to final income tax. This proposal differs from the Income Tax Article 22 mechanism, which is non-final and can therefore be credited against tax liabilities.

According to her, the real-time nature of ETF transactions is one of the considerations in the discussion on the possible application of final income tax.

“If, for example, this ETF with transactions that are real-time in nature is proposed to be final, this is what we are still reviewing within the Ministry of Finance itself,” she said.

In addition to the tax aspect, the government is also highlighting the readiness of gold that serves as the underlying asset of ETFs, especially if investors carry out redemptions.

Inge said the government needs to ensure adequate gold availability if there is an increase in redemption demand from holders of gold ETF products.

Moreover, ETF transactions do not directly show the gold that serves as the underlying asset, so inventory readiness is one of the aspects that needs attention when investors wish to redeem.

Although current gold supplies are considered potentially sufficient, the government still needs to observe market developments if gold ETF transactions grow larger.

The DJP hopes that certainty regarding the tax aspect can be prepared in line with the development of the gold ETF market. However, the decision on the timing of the market opening and development does not rest with a single institution because it involves a number of authorities and stakeholders.

“We are conducting discussions collaboratively together, and hopefully later, whether in determining the VAT, whether it is subject to VAT or not, we can decide together,” she said.

Furthermore, Inge said that tax regulations related to gold ETFs are planned to be set out in the form of a Government Regulation (PP).

The drafting of the PP requires a process and cross-party coordination, so the government hopes the discussions can be accelerated so that tax regulations are already in place when the gold ETF market develops more broadly.

“So that when the market is opened for this ETF, we are all ready with the tax provisions,” she said.