Indonesia offers 3% tax incentive to hybrid car makers

Indonesia will offer a sales tax incentive on Government-borne Luxury Goods (PPnBM DTP) of 3% for hybrid cars from next year.

Minister of Industry (Menperin) Agus Gumiwang Kartasasmita said at a press conference on December 16 that the Indonesian government asks hybrid car makers to register their hybrid car models with the government to get the PPnBM incentive.

To provide the sales tax incentive for hybrid motor vehicles, the cabinet estimates a budget requirement of IDR840 billion (US$52.5 million). Agus stated that under Regulation No. 36 of 2021 concerning low-carbon four-wheeled vehicles, the government mandates a local component value (TKDN) for hybrid car manufacturers participating in the programme.

In addition to hybrid vehicles, the government offers several incentives, including a 10% reduction in value-added tax (VAT) on imported fully built battery-operated vehicles (including passenger and electric cars, and electric buses) with a local content (TKDN) rate of 40%, and 5% for electric buses with a TKDN rate of 20-40%.

There is also a 15% sales tax on fully imported or completely knocked-down vehicles and a 0% import tax on fully built battery-operated vehicles. A 100% sales tax exemption applies to certain electric vehicles imported as fully built or completely knocked down. The total budget needed for these incentives is estimated at around IDR2.52 trillion ($157.4 million).