Indonesia to Provide Up to 10 Percent Tax Incentives on Electric Car, Bus Purchases

JAKARTA, KOMPAS.com - The Indonesian government will provide value-added tax (VAT) incentives of up to 10 percent this year on the purchase of electric cars and buses to accelerate the development of the national battery-based electric vehicle ecosystem.

"We are in the middle of harmonizing the final draft to issue the Finance Minister Regulation on the VAT incentives for electric cars and buses," Finance Minister Sri Mulyani Indrawati said at the launch of the “Government Assistance Policy for Battery-Based Electric Vehicle” on Monday, March 20.

The Finance Ministry notified the House of Representatives (DPR) regarding the government’s plan for the provision of the incentives on March 17, she added.

She said that a 10-percent VAT incentive would be provided for electric cars and buses with a domestic component level (TKDN) of above 40 percent, following the Industry Ministry’s requirements.

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Thus, only one percent VAT would be imposed on those products, the minister said – as the Indonesian Government imposes an 11 percent VAT on every product.

Furthermore, electric cars and buses, which have a TKDN of above 20 percent to 40 percent, will be given a 5 percent VAT incentive, she said.

She added that the models and types of vehicles that have met TKDN requirements will be stipulated by an Industry Minister Regulation.

The Energy and Mineral Resources (ESDM) Ministry and the Industry Ministry submitted their budget allocation proposals regarding the provision of VAT incentives to the Finance Ministry on February 16, 2023, and February 28, respectively.

Also read: Electric Vehicle Battery Production in Indonesia Expected to Start Next Year

"Later, the two ministries will prepare general guidelines and technical instructions [on the disbursement of the incentives] as well as discuss the budget with the related commission [of the DPR],” Sri Mulyani added.

She said that the provision of the incentives aims to expedite national economic transformation, increase investment attractiveness of the national battery-based electric vehicle industry, accelerate the energy transition from fossil to electric energy, and increase public interest in the utilization of electric vehicles.

Source: State News Antara