Home English News Automotive Indonesia reinstates full luxury tax exemption for small cars – 10% to 30% tax eliminated until end of year

Indonesia reinstates full luxury tax exemption for small cars – 10% to 30% tax eliminated until end of year

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Indonesia reinstates full luxury tax exemption for small cars – 10% to 30% tax eliminated until end of year

Indonesia’s finance ministry has reinstated a full exemption on the luxury goods sales tax (PPnBM) for cars with engines up to 1,500 cc. The incentive, which was introduced in March and has already been extended to August, was reduced to 25% at the start of September but is now back to 100% and will continue at this level until the end of the year.

Deputy finance minister Suahasil Nazara said that the move was intended to increase consumer spending that was blunted by the spread of the more transmissible Delta variant of COVID-19. The country will be exiting a Community Activities Restrictions Enforcement (PPKM) – equivalent to our movement control order – at the end of today, having imposed a lockdown of sorts since January.

Reuters previously stated that the luxury tax was charged at a rate of between 10 and 30%, making up a significantly greater chunk of a car’s price compared to our six-per-cent sales and service tax (SST). Those that have already purchased their vehicles in September will also be able to enjoy the sales tax exemption, as the difference will be refunded to them, reported AutonetMagz.

This exemption is only applicable for two-wheel-drive vehicles with a local content of at least 70%. It is reduced to 50% for vehicles with engines between 1,500 cc and 2,500 cc with more than 60% local content, and 25% for four-wheel-drive models.

According to Indonesian publication Bisnes, retail sales for the first six months of the year has increased by 38.5% compared to the same period last year. Local production has also grown 49.4% year-on-year, largely as a result of CKD exports that have jumped some 169.7%.

AutonetMagz said that the extensions will benefit a number of important new models due to be launched this year. This includes the production version of the Honda N7X concept – essentially the replacement for the BR-V – that will debut tomorrow, as well as the next Toyota Avanza and Daihatsu Xenia.



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