Indonesia lowers VAT on electric vehicles to 1%

By Reuters April 3, 2023 | 12:57 am PT

Vehicles are seen in traffic jam during afternoon rush hour in Jakarta, Indonesia, May 27, 2021. Photo by Reuters/Willy Kurniawan

Indonesia has lowered its value-add tax on battery-based electric vehicle sales to 1% from 11% to encourage the adoption of EVs, a government ministry said on Monday, amid efforts to attract investment into domestic production,

The incentive came into effect this month and will remain in place until the end of the year, the Coordinating Ministry of Maritime and Investment Affairs said in a statement.

A VAT cut was also applied to some electric buses, it said.

Indonesia is stepping up efforts to lure investment into domestic production of EV batteries and EVs to utilise its rich reserves of nickel, which is processed for battery production.

Officials have been trying to attract investment from electric car makers such as Tesla and China's BYD Auto.

South Korea's LG and Hyundai have already started constructing plants to assemble batteries and EVs in the Southeast Asian country.

Indonesia said last month it would allocate 7 trillion rupiah ($466.70 million) in state funds to subsidise electric motorcycle sales through 2024.