Tax Office Studies Gold ETF Tax Scheme, Considering Final Income Tax and VAT

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. This step is being taken to ensure appropriate regulation as the investment instrument market develops.

Director of Counselling, Services, and Public Relations at the DJP, Inge Diana Rismawanti, said her office is discussing with a number of industry associations to understand the gold ETF business process in depth. “Several associations have come to our office. We discussed and tried to understand together the business process that occurs when this ETF is carried out,” Inge said in Jakarta on Thursday (20/8).

To date, a specific tax scheme for gold ETFs is still under intensive discussion, covering aspects of Income Tax (PPh) and Value Added Tax (VAT). One crucial point being discussed is a proposal to impose final income tax on gold ETF transactions. This proposed final income tax differs from the current Article 22 income tax mechanism, which is non-final because the tax can be credited against tax liabilities. Inge explained that the real-time nature of ETF transactions is the main consideration behind the proposed final scheme.

“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 added.

Besides the tax aspect, the government is also highlighting the readiness of gold as the underlying asset for ETFs. This is particularly important when investors make redemptions. The government needs to ensure adequate physical gold availability in the event of a surge in redemption demand. Given that ETF transactions do not show physical gold directly, certainty of supply is a key factor in maintaining market confidence.

“We are conducting collaborative discussions together. Hopefully, whether in determining the VAT, whether it is subject to VAT or not, we can decide together later,” Inge said.

The DJP is targeting the tax regulation on gold ETFs to be set out in a Government Regulation (PP). Given that drafting a PP requires cross-sectoral coordination, the government is trying to accelerate the discussions so that the regulation is ready before the gold ETF market develops more broadly. Inge stressed that legal certainty regarding tax is crucial so that when the gold ETF market is officially opened on a massive scale, all stakeholders already have clear tax guidelines.