The Government Introduces New Regulations, Exempts Tax on Imported Electric Cars

The Government Introduces New Regulations, Exempts Tax on Imported Electric Cars
The Government Introduces New Regulations, Exempts Tax on Imported Electric Cars (photo: envato

In a significant move to boost the electric vehicle (EV) program, the government has introduced a revised policy. Presidential Regulation No. 79/2023, amending Regulation No. 55/2019, focuses on expediting the battery-based electric motor vehicle (BEV) initiative. This revision brings forth fiscal incentives for those importing fully assembled electric cars, involving exemptions from import duties and Luxury Goods Sales Tax (PPnBM).

Under the new regulation, Article 18 emphasizes, “Companies in the Battery-Based Electric Vehicle Industry procuring fully assembled battery-based electric vehicles through importation (CBU) may receive incentives.” The allocation of incentives, as outlined in Article 12, depends on the commitment of battery-based electric vehicle companies towards development, investment, or increased production.

In essence, these incentives are designed for companies dedicated to investing in electric cars or electric vehicles. The crucial aspect of the revision is elaborated in Article 19A, delineating incentives for completely imported electric vehicles.

Such incentives encompass exemptions from import duties or government-covered duty incentives, relief from Luxury Goods Sales Tax (PPnBM) covered by the government, and reductions in regional tax rates.

The procedural guidelines for offering incentives are detailed in paragraph 3 of Article 19A. This section applies to companies pledging to produce a specific quantity of battery-based electric vehicles within a stipulated timeframe, adhering to local content requirements.

Moreover, there is a commitment to guarantee equivalent incentives. Additionally, stringent measures are in place for companies failing to meet specified requirements or commitments.

Minister of Investment and Head of the Investment Coordinating Board (BKPM), Bahlil Lahadalia, recently announced the imminent issuance of this regulation. He affirmed that technical ministries had harmonized their efforts, awaiting the official release.

“The Presidential Regulation may not take long [to be issued], but technically the team has finished,” Lahadalia stated in Jakarta on Monday (11/12/2023).

He underscored that import quotas would be determined, ensuring allocation exclusively to automotive manufacturers committed to domestic investment. For instance, foreign brands seeking entry into Indonesia must commit to building production capacity before receiving government-assigned import quotas.

“The import quota is granted based on progress. If a new factory construction is at 20%, we will allocate a 20% quota accordingly. Should production reach 50%, we will further increase the quota by 50%, preventing foreign car manufacturers from flooding the domestic automotive market,” Lahadalia clarified.