Indonesia: More incentives for BEV unveiled

EV manufacturers investing in Indonesia may stand to benefit.

19 Mar 2024 3 minute read

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In brief

The BKPM and the Minister of Finance (MOF) have recently issued more incentives for four-wheeled battery electric vehicles (BEV). The incentives are: 0% import duty tariff, a release from the tax on sales of luxury goods and only 1% value-added tax (VAT) – these incentives apply with certain requirements.

Incentives in the EV sector are not new; there have been other incentives provided by the government to accelerate EV investment in Indonesia. These regulations, for instance, complement existing fiscal incentives of exemption or reduction of local tax, reduction of electricity charging fees, financial support for battery charging infrastructure development, and other incentives stipulated in a Presidential Regulation issued in 2019 (as amended). There is also another possible customs incentive of a 0% import duty tariff for the importation of goods, materials or machinery for manufacturing companies within the framework of investment.

Incentives under BKPM Regulation No. 6 of 2023

Head of BKPM Regulation No. 6 of 2023 on Guidelines and Governance for Providing Import and/or Delivery Incentives of Four-Wheeled BEV to Accelerate Investment ("BKPM Regulation 6/2023") is expected to boost EV investment in Indonesia. This regulation became effective on 19 January 2024.

BKPM Regulation 6/2023 provides the following incentives for BEV manufacturing companies in Indonesia:

An import duty tariff of 0% will apply for Completely Built Up (CBU) and Completely Knock Down (CKD) BEV with a Local Content Value (Tingkat Komponen Dalam Negeri, TKDN) of 20-40%.
The tax on sales of luxury goods of CBU and CKD BEV with TKDN of 20-40% will be borne by the government.

As the incentives apply to CBU and CKD BEV, manufacturing companies that have not started to manufacture EV in Indonesia can also use these incentives.

The above incentives can be used until 31 December 2025 by industrial companies that (i) will build manufacturing facilities in Indonesia, (ii) will partially or wholly shift production of EVs to Indonesia, or (iii) have invested in EV manufacturing facilities in Indonesia with the purpose of introducing new products through increasing their production plan or capacity.

Issuance of Minister of Finance (MOF) regulations

Following the issuance of BKPM Regulation 6/2023, the MOF has also issued regulations to implement the incentives, i.e., MOF Regulations No. 8, 9 and 10 of 2024.

MOF Regulation No. 8 of 2024 introduces an additional incentive of 10% of value added tax (VAT) to be borne by the government for the delivery of BEV in 2024 –provided that the BEV has a TKDN value of at least 40%. This incentive is given for the tax period of January to December 2024.
MOF Regulation No. 9 of 2024 further introduces an exemption to the tax on sales of luxury goods, for fiscal period of January to December 2024.
MOF Regulation No. 10 of 2024 amends the previous MOF regulation relating to goods classification and import duty rates for imported goods. The new regulation adds BEV for road transportation that are under (i) tariff posts 8703.80.17, 8703.80.18, and 8703.80.19, as well as (ii) tariff posts 8703.80.97, 8703.80.98, and 8703.80.99, are subject to 0% customs duty rate.

There are certain tax obligations that must be undertaken by the seller including preparing a realization of VAT report and issuing tax invoices with certain requirements, in order to benefit from the incentives.

Process and timeframe

Please note the following process and requirements to obtain the incentives based on BKPM Regulation 6/2023:

The manufacturing company should submit a proposal letter for the incentives with supporting documents no later than 1 March 2025 through the OSS system. Supporting documents include a commitment letter stating that the company will be ready for commercial production by 1 January 2026 and will produce EV no later than 31 December 2027.
The submitted proposal will be assessed by the ministries of Maritime and Investment, Industry, Finance and Trade and potentially other authorities.
If a proposal is deemed complete and correct, the OSS will issue a proposal letter. This proposal letter should be used by the manufacturing company to obtain a bank guarantee of their commitments.
Once the bank guarantee has been verified by the Ministry of Investment, the OSS will issue an approval letter to obtain the incentives. The approval letter is the basis for manufacturing companies to obtain the incentives from the Ministry of Finance and an import certificate from the Ministry of Trade.

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