Indonesia EV Sector Incentives – Introduction
The Indonesian government, in collaboration with the Investment Coordinating Board (BKPM) and the Ministry of Finance (MOF), is introducing additional incentives for the battery electric vehicle (BEV) sector.
These incentives, which include a 0% import duty tariff, exemption from the tax on sales of luxury goods, and a reduced value-added tax (VAT) rate of 1%, are designed to stimulate further investment in the burgeoning electric vehicle industry.
These measures are aligned with Indonesia’s ongoing commitment to accelerating EV investment and complement previous fiscal incentives outlined in the 2019 Presidential Regulation.
BKPM Regulation No. 6 of 2023
Issued on 19 January 2024, BKPM Regulation No. 6 of 2023 offers a range of incentives for BEV manufacturing in Indonesia. Highlights include:
- A 0% import duty for both Completely Built Up (CBU) and Completely Knock Down (CKD) BEVs meeting Local Content Value (TKDN) requirements of 20-40%.
- The government bearing the tax on sales of luxury goods for CBU and CKD BEVs with TKDN of 20-40%.
- Eligibility for manufacturing companies to utilize these incentives until 31 December 2025, under specific conditions such as constructing new manufacturing facilities, transitioning to EV production, or expanding existing EV manufacturing capabilities.
Minister of Finance Regulations
General
In alignment with BKPM Regulation No. 6 of 2023, the MOF issued three critical regulations to implement the new incentives:
MOF Regulation No. 8 of 2024
An additional 10% VAT borne by the government for BEV deliveries in 2024, applicable to BEVs with a TKDN of at least 40%;
MOF Regulation No. 9 of 2024
Further outlines the exemption from the tax on sales of luxury goods for the fiscal period of January to December 2024.
MOF Regulation No. 10 of 2024
Updates goods classification and import duty rates, specifically adding BEV under certain tariff posts to be subject to a 0% customs duty rate.
Application Process and Timeframe
To avail of these incentives, manufacturing companies must submit a proposal through the OSS system by no later than 1 March 2025.
This process involves a proposal letter, commitment statements, and subsequent assessment by relevant ministries.
Upon meeting all requirements, companies will receive an approval letter, which serves as the basis for obtaining incentives from the Ministry of Finance and an import certificate from the Ministry of Trade.
Indonesia EV Sector Incentives – Conclusion
As these regulations represent a significant boost for Indonesia’s EV sector, they mark a promising step towards the country’s sustainable and innovative automotive future.
While the application process is still evolving, these incentives are expected to attract considerable investment, drive EV manufacturing, and position Indonesia as a leader in the electric vehicle market.
Final thoughts
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