The Indonesian government is taking significant steps to accelerate the adoption of electric vehicles (EVs) through various incentives and regulations. These initiatives aim to make EVs more accessible to consumers and encourage investment in domestic production facilities. Below are the key measures introduced:

1. Electric Car Import Tax (CBU) Facility

The government has announced an import duty exemption for electric cars imported as Completely Built-Up (CBU) units. This incentive will be effective from 2024 to 2027. Currently, imported CBU cars in Indonesia are subject to an average import duty of 50% of the vehicle’s CIF value.

Key Conditions:

• Application Process: Companies seeking this facility must submit an application to the government, including a commitment to establish an electric vehicle production plant in Indonesia by December 2027
• Production Capacity: By 2027, the company’s domestic production capacity must match the imported capacity realized in the previous year
• Local Content Requirement: Domestically produced vehicles must meet a minimum local content standard (TKDN) of 40%.
• Guarantee Fund: Companies must deposit a guarantee equivalent to the import duty value of the electric cars (CBU) in a 1:1 ratio. The guarantee will be refunded if the domestic production commitment is met on time. Failure to meet the production timeline will result in the government claiming the guarantee as compensation.

2. Tax Holiday Facility

Industries engaged in the production of four-wheeled vehicles (KBLI 29101) and two-/three-wheeled vehicles (KBLI 30911) can apply for a 100% corporate income tax exemption (tax holiday). The duration of the tax holiday ranges from 5 to 20 years, depending on the investment value prior to commercial operations.

Key Conditions:

1. Application: Companies must submit an investment plan to the Ministry of Investment.
2. Minimum Investment:
   • For a 5-year tax holiday, a minimum investment of IDR 100 billion is required.
   • Companies located in Special Economic Zones (KEK) with an investment above IDR 1 trillion can qualify for a tax holiday of up to 20 years.

3. Import Tax Exemption for Machinery

Companies importing machinery as part of their capital investment can benefit from exemptions on import duties, VAT, and import income tax.

Key Conditions:

1. Collaboration with Local MSMEs: Companies must partner with local Micro, Small, and Medium Enterprises (MSMEs) with a minimum partnership value of IDR 500 million.
2. Approval Requirement: The Ministry of Investment must approve the production plan and the list of machinery to be imported.

4. Incentives for Consumers

The government also offers direct incentives to make EVs more affordable for consumers. These include:

1. VAT Incentives:
   • A 10% VAT reduction for four-wheeled EVs and certain EV buses with a minimum TKDN of 40%.
   • A 5% VAT reduction for specific EV buses with a TKDN between 20% and 40%.
2. Luxury Goods Tax (PPnBM) Incentives:
   • A 15% PPnBM reduction for imported EVs (CBU) and domestically produced EVs (CKD).
   • A 3% PPnBM reduction for locally produced hybrid vehicles (specific TKDN regulations to be finalized by 2025).

Product Requirements for Incentives:

1. Producer Registration: EV manufacturers must register and undergo industrial verification by an independent verification body.
2. Verification Objectives:
   • Ensure marketed products match type-test specifications.
   • Confirm TKDN achievements.
   • Validate production capacity compliance.