Indonesia: Tax Structure to be Based on Vehicle Emissions

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The government of Indonesia will revise its tax scheme for motor vehicles, namely the luxury good sales tax effective from October 16, 2021, according to Indonesian news site Kontan. The new tax structure will be based on a vehicle’s exhaust emissions, and will replace the existing tax structure which is based on the vehicle’s engine displacement.

With the enactment of this new ruling, there will be changes to motor vehicle prices in the Indonesian market. Chairman of the Association of Indonesia Automotive Industries, Jongkie Sugiarto is also in favor of Indonesia’s another regulation which will see the adjustment of vehicle prices based on tariffs for battery-electric vehicles, PHEVs and fuel-cell EVs.

Related: Indonesia Reinstates Tax Exemption for Small Cars

The decision has been welcomed in Indonesia by the auto industry representatives and automakers alike. According to the Marketing Director of Toyota Indonesia, Anton Jimmi Suwandy: “We hope that the implementation will be smooth, in order for benefits to consumers as well as industry players and the state to be optimal.” Honda Indonesia also welcomed the move and said “the company considered the new regulation to be a good move as it would have a positive impact on the environment.”

Earlier in June, Indonesia extended its full luxury tax break for 1.5L & below 2-wheel-drive cars until August; the exemption was then reduced in September to 25%, though later it has been fully reinstated to be effective till the end of year 2021.

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