Indonesia launches VAT Reduction for New Electric Vehicles

Since 1 April 2023, a regulation on a Value Added Tax (VAT) reduction has come into force in Indonesia for two types of new battery electric vehicles (BEVs) and will be valid until December 2023. This incentive is stipulated under the Ministry of Finance Regulation No. 38 of 2023 (MoF Reg, 38/2023).

The regulation is titled “VAT for the Handover of Certain Types of 4-Wheel Battery Electric Vehicles (BEV) and BEV Busses which is borne by the government for the Financial Year 2023”. Thus, the VAT reduction is provided at certain percentages from April to December 2023.

Only certain vehicles benefit from the VAT reduction

The percentage of the normal VAT rate for the BEVs is 11 per cent from the sales price. According to the regulation, the following types of new passenger and bus BEVs that meet 40 or 20 per cent of local component materials (Tingkat Komponen Dalam Negeri – TKDN) can benefit from the following reduction of VAT:

Companies must complete several steps to obtain the VAT reduction

The Ministry of Industry determines the fulfilment of local component materials for the above two categories of BEVs. In order to benefit from the VAT reduction, a company should issue the tax invoice (faktur pajak) for the amount borne by the government and the remaining VAT amount separately. An example of how to calculate the VAT in the tax invoice is provided in the annex to the regulation.

In addition, the company must prepare a report on the realisation of the VAT borne by the government, that meets all the requirements of the ordinance. This report should be included within the VAT Report Letter (SPT Masa PPN) by 31 January 2024 at the latest.

GPQI supports knowledge exchange in the electromobility sector

The QI of the electromobility sector is discussed within the framework of the German-Indonesian Dialogue on Quality Infrastructure. The dialogue is implemented in Indonesia by the Global Project Quality Infrastructure (GPQI) of the German Federal Ministry for Economic Affairs and Climate Action. Contact us to get involved: indonesia@gpqi.org