Public discourse has recently been stirred by news that the Malang Regional House of Representatives (Dewan Perwakilan Rakyat Daerah/DPRD) plans to impose a 10% regional tax on Micro, Small, and Medium Enterprises (MSMEs) with gross revenue exceeding IDR 15 million (detik, 2026). This proposal is included in the Draft Amendment to Regional Regulation Number 4 of 2023 (IDN Times, 2025).
The proposed change has sparked debate. While the DPRD and the Malang city government assert that the Directorate General of Fiscal Balance has reviewed the amendment and aims to ensure legal certainty, it is also meant to support a tax collection system that is orderly, economical, effective, efficient, and accountable (IDN Times, 2025).
However, many MSME operators have voiced concern, saying that a 10% tax rate would be burdensome, especially in the current economic climate. So, what exactly are regional taxes and levies, and how do they work? This article will break it down.
The authority to impose regional taxes is granted under Law of the Republic of Indonesia Number 1 of 2022 concerning Financial Relations Between the Central Government and Regional Governments and Government Regulation Number 35 of 2023 concerning General Provisions for Regional Taxes and Levies.
Under these laws, both provincial and city/district governments are authorized to impose regional taxes. The law defines the following seven types of taxes that fall under the authority of provincial governments:
- motor vehicle tax;
- motor vehicle title transfer tax;
- heavy equipment tax;
- motor vehicle fuel tax;
- surface water tax;
- cigarette tax; and
non-metallic mineral and stone extraction tax surcharge.
Meanwhile, city/district governments are allowed to levy the following nine types of taxes:
- rural and urban land and building tax;
- land and building acquisition duty;
- tax on certain goods and services;
- billboard advertising tax;
- groundwater tax;
- non-metallic mineral and stone extraction tax;
- edible bird's nest tax;
- motor vehicle tax surcharge; and
motor vehicle title transfer tax surcharge.
Motor Vehicle Tax
Law of the Republic of Indonesia Number 1 of 2022 and Government Regulation Number 35 of 2023 stipulate that ownership and/or control of motor vehicles are subject to motor vehicle tax. This tax is imposed on individuals or entities that own or control motor vehicles. Exemptions apply for specific vehicles below:
- trains;
- those used solely for national defence and security purposes;
- those of embassies, consulates, foreign representatives based on reciprocity, and international institutions receiving tax exemption from the government;
- renewable energy vehicles; and
- other motor vehicles as stipulated in regional regulations.
Motor Vehicle Title Transfer Tax
Law of the Republic of Indonesia Number 1 of 2022 concerning Gross Regional Domestic Product regulates that this tax applies when ownership of a motor vehicle is transferred for the first time. Individuals or entities receiving the motor vehicle transfer are subject to the motor vehicle title transfer tax.
The tax is based on the government-determined sale value, with rates capped at 12%.
Heavy Equipment Tax
A heavy equipment tax is levied on the ownership of heavy equipment. The subject of the heavy equipment tax is individuals or entities owning heavy equipment. This tax is based on the average market price, with a maximum rate of 0.2% as stipulated in Law of the Republic of Indonesia Number 1 of 2022.
Motor Vehicle Fuel Tax
Motor vehicle fuel tax is a tax charged on the delivery of fuel to end-users. The subject of this tax is motor vehicle fuel users. However, Law of the Republic of Indonesia Number 1 of 2022 also stipulates that the motor vehicle fuel taxpayers are individuals or motor vehicle fuel providers who deliver the fuel.
This tax has a maximum rate of 10% under Law of the Republic of Indonesia Number 1 of 2022 and Government Regulation Number 35 of 2023.
Surface Water Tax
As the name suggests, the surface water tax is imposed upon drawing or using surface water. Exemptions include water use for the following purposes:
- basic household needs;
- irrigation for local farming;
- community fisheries;
- religious activities;
- activities utilizing sea water, whether in the ocean and/or on land (brackish water); and
- other specific environmentally responsible uses stipulated in the regional regulation.
Individuals or entities that draw and/or use surface water are subject to this tax with a maximum rate of 10%.
Cigarette Tax
A cigarette tax is a consumption tax on all forms of cigarettes, including cigars and hand-rolled tobacco. While the burden falls on consumers, producers and importers are responsible for collecting and remitting the tax along with excise duties.
The Directorate General of Customs and Excise is authorized to collect both the cigarette tax and the cigarette excise. The legal basis for this tax imposition is the excise tax set by the government on cigarettes, capped at 10%.
Non-Metallic Mineral and Stone Extraction Tax Surcharge
The non-metallic mineral and stone extraction tax surcharge applies to the extraction of the following materials:
- asbestos;
- slate;
- semi-precious stones;
- limestone;
- pumice;
- gemstones;
- bentonite;
- dolomite;
- feldspar;
- rock salt (halite);
- graphite;
- granite/andesite;
- gypsum;
- calcite;
- kaolin;
- leucite;
- magnesite;
- mica;
- marble;
- nitrate;
- obsidian;
- ocher;
- sand and gravel;
- quartz sand;
- perlite;
- phosphate;
- talc;
- fuller's earth;
- diatomaceous earth;
- clay;
- alum (alum);
- trass;
- jarosite;
- zeolite;
- basalt;
- trachyte;
- sulphur;
- non-metallic minerals and stones that are extracted as part of mineral mining activities; and
- Other types of non-metallic mineral and stone extractions as stipulated in applicable laws and regulations.
Non-metallic mineral and stone extraction taxpayers are individuals or entities extracting these resources, and the tax is based on the sale value. The government has set the surcharge on non-metallic mineral and stone extraction tax at up to 20%.
This overview outlines the various taxes collected at the provincial level. In a follow-up article, we will explore the types of taxes imposed by city and district governments.
Legal References
- Law of the Republic of Indonesia Number 1 of 2022 concerning Financial Relations Between the Central Government and Regional Governments
- Government Regulation Number 35 of 2023 concerning General Provisions for Regional Taxes and Levies
References
- detikTok! Usaha Beromzet Rp 15 Juta di Kota Malang Kena Pajak 10%
- IDN TimesIDN Times Jatim
