The Indonesian government has made the decision to grant exemptions on two local taxes, namely the vehicle tax (PKB) and vehicle ownership transfer fee (BBNKB) for electric vehicles (EV). These new exemptions are outlined in the Home Affairs Ministerial Regulation (Permendagri) No 6/2023. The Permendagri was signed on April 26, 2023.
However, these incentives are only valid for battery-based EVs, not for EVs converted from fossil-fuel vehicles.
Government initiatives to bolster EV sales
Tax exemption is one of the government’s efforts to bolster EV sales, especially for electric cars, which are considered luxury goods and generally more expensive than conventional cars.
Direct subsidies are also unlikely to be extended to electric cars, as they are limited in number and fall within a restricted range of models available in the market.
Consequently, the new policy is hoped to accelerate the adoption of eco-friendly EVs, which aims to support the government’s ongoing endeavors to reduce carbon emissions to achieve the zero emissions target by 2060 or sooner.
Growing incentives for EVs in Indonesia
The PKB and BBNKB exemptions add to the list of incentives for EVs released by the Indonesian government.
Previously, in 2020, battery-based EVs were still subject to a fee of 20 percent to 30 percent of tax base (DPP). The rate then decreased to ten percent in 2021-2022 even though Law No 1/2022 on financial relations between the central government and regional administrations (HKPD) the exemptions start on January 5, 2025.
Additional incentives that are already in place include a zero percent down payment option for financing facilities for EV, reduced electricity rates of up to 30 percent for charging EVs during off-peak hours or outside peak loads, exemptions on import duties, and cash subsidies for those purchasing electric motorcycles.
Thus, with this new regulation, outlined in Permendagri No 6/2023 is expected to ramp up Indonesia’s EV adoption as soon as possible.