VAT incentives for four-wheeled electric vehicles and buses are based on the value of the domestic component level, with tax subsidies ranging from 5-10%.
Heaptalk, Jakarta — The Indonesian government announced the provision of value-added tax (VAT) incentives for the purchase of four-wheeled electric vehicles and buses. The incentive is valid for the 2023 fiscal year with the April-December 2023 tax period starting. Previously, the government released incentives for purchasing electric motorcycles with a total allocation of US$456 million.
The provision of these incentives is based on Minister of Finance Regulation No. 38 of 2023 on Value Added Tax on Delivery of Certain Four-Wheel Battery-Based Electric Motorized Vehicles and Certain Bus Battery-Based Electric Motorized Vehicles Borne by the Government for Fiscal Year 2023 (PPN DTP of Electric Vehicles).
In more detail, the value-added tax incentives are provided for two types of vehicles. First, four-wheel battery-based electric motorized vehicles and buses with a domestic component level (TKDN) of at least 40% will be given a tax subsidy of 10%, resulting in only 1% tax remaining to be paid.
Second, four-wheel battery-based electric motorized vehicles and buses with domestic component levels ranging from 20-40% will be given a tax of 5%, making the paid tax only 6%.
“This policy is launched to accelerate the economic transformation to increase the attractiveness of investment in the electric vehicle ecosystem, expand employment opportunities, and accelerate the transition from the use of fossil energy to electricity. Thus, in the future it is expected to accelerate emission reductions as well as energy subsidy efficiency,” said the Head of the Fiscal Policy Agency at the Ministry of Finance, Febrio Kacaribu.
Meanwhile, the Ministry of Industry determined the model and type of vehicles that meet the domestic component level through the Decree of the Minister of Industry No. 1641 of 2023. The value criteria for the domestic component level follow alignment with Presidential Regulation No. 55 of 2019 and the roadmap for the battery-based electric motorized vehicle acceleration program from the Ministry of Industry.
Director General of Metal, Machinery, Transportation Equipment, and Electronics (ILMATE) Industry at the Ministry of Industry, Taufiek Bawazier, said, “With the implementation of the government-borne value-added tax facilitation program for certain four-wheeled electric vehicles and certain buses, the government hopes that public interest in buying EVs increases, and supports the creation of an electric vehicle ecosystem in the country, in the early stages it is estimated that there will be 35,862 units of electric cars and 138 units of electric buses in 2023.”
Further, the Director General of ILMATE will appoint an independent verification agency to oversee the suitability of the domestic component-level values. If under supervision there are EVs that do not meet the set value, the Director General of ILMATE can provide an administrative sanction by removing them from the list of certain motorized vehicles that can take advantage of the value-added tax borne by the government.
