Indonesia slashes VAT for electric vehicles to 1%

Jakarta during the rush hour / Photo credit: Shutterstock

The Indonesian government announced on Monday that the country has reduced the value-added tax on sales of battery-based electric vehicles from 11% to 1% in an effort to promote their adoption.

The incentive, which was mandated by a finance ministry regulation issued in March, will be effective from this month until the end of the year, Luhut Binsar Pandjaitan, coordinating minister for maritime affairs and investment, said in a statement.

This incentive program applies to electric cars and buses powered by components – at least 40% – that are locally manufactured. The government will roll out the tax relief “gradually and measurably,” according to Pandjaitan.

This comes as Indonesia takes significant steps to boost EV adoption.

See also: Indonesia courts Tesla but faces EV roadblocks

In 2021, the government began the exemption of luxury tax on EVs, making them more affordable for consumers. It has also been trying to attract Tesla to invest in the country and establish a presence in Southeast Asia.

In March, the government announced a subsidy program worth US$110 million for EV manufacturers, retailers, and individual users.