On 12 February 2024, the Ministry of Finance (MoF) announced a series of new regulations to boost Electric Vehicle (EV) adoption. These regulations took effect three days after the regulations’ issuance date (15 February 2024). They offer significant tax breaks for imported and domestically produced EVs.

VAT and Luxury Tax Incentives Introduced

Under the new measures, the government “bears” the VAT on the delivery of certain EVs, according to MoF Regulation No. 8/2024. MoF Regulation No. 9/2024 also introduces similar benefits for luxury EVs, offering a break on the Luxury-Goods Sales Tax (LST) for imports and deliveries. These incentives apply throughout 2024.

Import Duty Cut for EVs

MoF Regulation No. 10/2024 further boosts the EV market by slashing import duty rates to 0% on all imported EVs. This attractive incentive will be in effect until 2025 (31 December). These new Ministry of Finance regulations are expected to significantly reduce the cost of EVs for Indonesian consumers, potentially accelerating the transition towards a more sustainable transportation sector.

MoF Regulation No. 8/2024

The government has introduced a VAT incentive for Battery-powered Electric Motor Vehicles (EVs) to promote the use of electric energy and reduce reliance on fossil fuels. The incentive will apply from January to December 2024. To qualify for the incentive, specific four-wheeled battery-based electric motor vehicles and/or specific battery-based electric motor bus vehicles must meet the Domestic Component Level (TKDN) criteria with a minimum of 20% and 40%.

The government will bear the VAT cost until December 2024 for the following conditions:

• If the specific four-wheel battery-based electric vehicle and/or specific battery-based electric bus vehicle meets the TKDN value criteria with a minimum of 40%, the VAT incentive is 10% of the Selling Price; and
• If the specific battery-based electric bus vehicle meets the TKDN value criteria with a range of 20% – 40%, the VAT incentive is 5% of the Selling Price.

The Indonesian Tax Authority can still collect the VAT Payable if the below data/information is obtained:

• The EV is not a brand-new vehicle and is not registered with the Ministry of Industry;
• The EV does not meet the TKDN value criteria;
• The VAT incentive implementation is before or exceeds January 2024 – December 2024; and
• The Taxable Entrepreneur fails to produce tax invoices and/or submit the realization report.

Lastly, the reporting and amendment of the monthly VAT returns for January to December 2024 can be regarded as realization reports, provided they are submitted by 31 January 2025 at the latest.

MoF Regulation No. 9/2024

In 2024, the Indonesian government will offer specific tax incentives to entrepreneurs who import or deliver luxury electric vehicles. These incentives will cover completely built-up (CBU) and completely knocked-down (CKD) battery-based EVs with four wheels. From January to December 2024, the government will cover 100% of the luxury EVs’ luxury sales tax (LST).

MoF-9/2024 stipulates that fulfillment of the incentive period is proven by:

1. the date of registration of the import declaration (Pemberitahuan Impor Barang/PIB) documents, for imports of certain four-wheeled CBU EVs; or
2. the LST invoice date, for the delivery of certain four-wheeled EVs.

The Indonesian Tax Authority can still collect the VAT Payable. This applies if the necessary approval documentation is unavailable or the imported EVs do not comply with regulations. Additionally, entrepreneurs must create an import declaration and the incentive realization report and issue the tax invoice accordingly.

Like MoF Regulation No. 8/2024, the reporting and amendment of the Monthly LST Returns on the import/delivery of certain luxury EVs from January to December 2024 can be treated as realization reports if submitted by 31 January 2025 at the latest.

MoF Regulation No. 10/2024

This regulation includes an additional section that outlines the procedures, terms, and regulations regarding the import of battery-based electric motorized vehicles in the Battery Electric Vehicle Program, including incentives in terms of import duty rates. This aims to encourage the transition from fossil energy to electric energy, attract investment, and increase domestic production of battery-based electric motorized vehicles while ensuring compliance with the regulatory framework.

The salient points of this regulation are as follows:

1. Import duty rates
   Establishes a tariff post subject to 0% import duty until 31 December 2025. This tariff post covers types of battery-based electric motorized vehicles, which are included in:
   1. tariff lines 8703.80.17, 8703.80.18, and 8703.80.19; and
   2. tariff lines 8703.80.97, 8703.80.98, and 8703.80.99.

   This import duty rate applies to the import of battery-powered electric motorized vehicles by business entities that meet the criteria as regulated in Regulation Number 6 of 2023 issued by the Minister of Investment/Head of the Investment Coordinating Board (“BKPM”).

2. Terms of Use of Import Duty Tariffs
   To enjoy the Import Duty incentive, importers must fulfill the following conditions:
   1. attach a letter of approval for import incentives and/or delivery of four-wheeled battery-based electric motor vehicles issued by the Ministry of Investment/BKPM; and
   2. Include facility code 87 for approval for the use of incentive for import/delivery of four-wheeled battery-based electric motor vehicles in the column to fulfillment of import requirements/facilities in the PIB document.
3. Validation Process
   The Indonesian National Single Window System (“INSW”) validates data elements in goods import notification documents. If the validation results are inappropriate, the System returns the document to the importer for correction.
4. Manual Procedures
   Customs officers will conduct research and withhold manually if the withholding process cannot be completed using the Indonesian National Single Window System.