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Jakarta, Ideatax -- Gaikindo reported that the sales performance of electric cars in Indonesia showed a positive trend. During the period January to March 2023, Gaikindo noted that sales of electric cars in Indonesia reached 1,800 units (Databoks, 2023). In fact, in the same period of the previous year, the number of electric car sales in Indonesia only reached 64 units (Databoks, 2023). This shows a significant increase in vehicle sales as shown in the following chart:
Source: Gaikindo
Downstream Industry Incentives
The increase in sales of battery-based cars is partly due to the incentive of Value Added Tax that is Borne by the Government (PPN DTP) on the sale of electric cars. Through Minister of Finance Regulation Number 38 of 2022 concerning Value Added Tax on Delivery of Certain Four-Wheeled Battery-Based Electric Motor Vehicles and Certain Bus Battery-Based Electric Motor Vehicles Covered by the Government for Fiscal Year 2023, the Government provides facilities in the form of VAT DTP of 10% on the sale of electric cars that contain a Domestic Component Level (TKDN) with a minimum value of 40%.
This means that sales of electric cars with 40% domestic components will receive a 10% government-borne VAT facility, so consumers only need to pay VAT of 1% of the selling value of the electric vehicle.
In addition to providing VAT DTP facilities for the delivery of electric vehicles, the Government also provides sales tax facilities on luxury goods (PPnBM). Government Regulation number 74 of 2021 concerning Amendments to Government Regulation Number 73 of 2019 concerning Taxable Goods that are Classified as Luxury in the Form of Motor Vehicles Subject to Sales Tax on Luxury Goods regulates that motorized vehicles that use battery electric technology or fuel cell electric vehicles are subject to Sales Tax on Luxury Goods of 15% with a Tax Imposition Base of 0%. Thus, effectively there is no PPnBM that must be paid by consumers for the purchase of electric vehicles.
These various tax incentives on the downstream side will provide a multiplier effect in the form of increased sales of electric cars and their supporting components in the long run. Hence, this opportunity should not be wasted not only by electric car manufacturers, but also by upstream industries of electric vehicle such as the nickel mining and smelter industries.
In fact, the Chairman of the BUMN EV battery Development Acceleration Team, Agus Tjahajana Wirakusumah, stated that the price of electric vehicle batteries is approximately 35% of the vehicle production cost (Liputan 6, 2021). Thus, if investors are able to supply electric batteries with domestic components, it is likely that electric vehicles sold will get VAT facilities borne by the government and will ultimately increase demand for electric cars.
Upstream Industry Incentives
Apart from the downstream side, various tax incentives and facilities are also offered by the Government to the upstream electric car industry and its derivative industries. Through Minister of Finance Regulation Number 130 of 2020 concerning Provision of Corporate Income Tax Reduction Facilities, the Government provides corporate income tax reduction facilities for pioneer industries.
The provision regulates that pioneer industries are industries that have broad linkages, provide added value and high externalities, introduce new technologies, and have strategic value for the national economy, one of which is the motor vehicle manufacturing industry and the main components of motor vehicles.
Furthermore, the provision also regulates that there are two types of corporate income tax reduction that can be received by taxpayers investing in pioneer industries: First, a 100% reduction in corporate income tax for corporate taxpayers with investments of five hundred billion rupiah or more. Second, a 50% reduction in corporate income tax for taxpayers with investments between one hundred billion and five hundred billion.
Regarding the period of corporate income tax reduction or plural tax holiday, PMK 130 regulates that there are five types of tax holiday periods for pioneer industries. First, a five-year tax holiday is given to new capital investment with a value of five hundred billion to one trillion rupiahs. Second, a seven-year tax holiday is given to new capital investments with a value of one trillion to five trillion rupiah. Third, a ten-year tax holiday is given to new capital investments with a value of five trillion to fifteen trillion rupiah. Fourth, a fifteen-year tax holiday is given to new capital investments with an investment value of fifteen trillion to thirty trillion rupiahs. Finally, a twenty-year tax holiday is given to new capital investments with an investment value of more than thirty trillion.
In addition to providing incentives in the form of tax holidays, the industry upstream of electric vehicles can also take advantage of incentives in the form of Super Tax Deduction offered by the Government. Minister of Finance Regulation Number 128 of 2019 concerning the Provision of Gross Income Reduction for the Implementation of Work Practices, Apprenticeship, and/or Learning Activities in the Context of Development and Development of Certain Competency-Based Human Resources, regulates that the government can provide a gross income reduction of up to 200% (two hundred percent) of the total costs incurred for work practice, internship or learning activities.
Furthermore, the provision also regulates that the facility in the form of a gross income reduction of a maximum of 200% of the costs incurred for work practice, internship or learning activities is given to taxpayers who have carried out work practices or apprenticeships, have a cooperation agreement, are not in a fiscal loss condition and have submitted a fiscal certificate.
The third alternative that can be utilized by the upstream industry is the mechanism of cooperation with the Investment Management Institution or commonly called the Indonesia Investment Authority. Government Regulation Number 49 of 2021 concerning Tax Treatment of Transactions Involving Investment Management Institutions and or Entities Owned by them regulates that there are at least three tax facilities provided: exemption from income tax on loan interest, imposition of lower income tax rates on dividends and imposition of lower income tax on capital gains. Through the investor - LPI cooperation scheme, it will certainly make the battery industry more competitive.
Based on the description and discourse above, we can conclude that the future of the electric car industry is in Indonesia. Where the government provides various facilities for investors to invest in the electric vehicle industry along with supporting industries such as smelters, nickel mining and battery manufacturing.
Related regulations
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Government Regulation Number 49 of 2021 concerning the Tax Treatment of Transactions Involving Investment Management Institutions and or Possessed Entities
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Government Regulation Number 74 of 2021 concerning Amendments to Government Regulation Number 73 of 2019 concerning Taxable Goods classified as Luxury in the Form of Motor Vehicles Subject to Sales Tax on Luxury Goods
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Minister of Finance Regulation No. 128 of 2019 on the Provision of Gross Income Deduction for the Implementation of Practical Work, Apprenticeship, and / or Learning Activities in the Context of Development and Development of Human Resources Based on Certain Competencies
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Minister of Finance Regulation Number 130 of 2020 concerning Provision of Corporate Income Tax Reduction Facility
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Minister of Finance Regulation Number 38 of 2022 concerning Value Added Tax on Delivery of Certain Four-Wheeled Battery-Based Electric Motor Vehicles and Certain Bus Battery-Based Electric Motor Vehicles Borne by the Government for Fiscal Year 2023
References
Databoks. (2023, April 18). Tren Penjualan Mobil Listrik Menguat pada Kuartal I 2023. Retrieved from Databoks: https://databoks.katadata.co.id/datapublish/2023/04/18/tren-penjualan-mobil-listrik-menguat-pada-kuartal-i-2023
Liputan 6. (2021, Februari 6). Jadi Komponen Paling Mahal, RI Bakal Menang Banyak Produksi Baterai Mobil Listrik. Retrieved from Liputan 6: https://www.liputan6.com/bisnis/read/4476719/jadi-komponen-paling-mahal-ri-bakal-menang-banyak-produksi-baterai-mobil-listrik
