Indonesia to replace its luxury tax with emissions-based tax for motor vehicles from October 16

According to the reports, the Indonesian government has decided to revise the motor vehicle tax by replacing the luxury tax based on engine capacity with an emission-based tax. The government will impose a new PPnBM (Luxury Goods Sales Tax) scheme, taking effect from October 16, 2021.

Previously, the PPnBM taxes were levied on the types of vehicles, such as sedans and saloons, as well as on the vehicle motion systems and the engine capacity. The new PPnBM tax scheme, however, will be based on the amount of exhaust gas emissions motor vehicles release.

The new tax scheme is in accordance with regulation No. 73, 2019 of the Indonesian government. The regulation was formulated on October 16, 2019, concerning the Luxury tax for motorized vehicles, and will take effect 2 years later on October 16, 2021.

Reports have predicted a change in the PPnBM rates of motor vehicles after the enactment of this new tax scheme. As a result, the selling price of new cars is also expected to change.

Jongkie Sugiarto, Chairman of the Gaikindo (Association of Indonesia Automotive Industries) is in favor of the new regulation (PP No. 74, 2021) as he believes that the new PPnBM tax imposition will check and control the gas emission levels while also minimizing the utilization of fuel.

In an interview conducted by the Indonesian news portal, Kontan, Jongkie said that the PPnBM rates have shot up for certain types of motorized vehicles while for others the rates have decreased.

The good news is the government of Indonesia has extended motor vehicles’ PPnBM incentive period (DTP), which was 100% government-borne, until December 2021. For motorized vehicles not included in the 100% DTP PPnBM recipient list, the PP No. 74, 2021 tax scheme will apply.

Jongkie further said that he is trying to implement PMK 120/2021 or offer  relaxation of 100% PPnBM for some specific car types by the end of this year. However, both the PMK 120/2021 tax scheme and the PPnBM 100% relaxation policies will be applicable for 29 categories of vehicles, while the other types are required to follow the PP No. 74, 2021 regulation.

Source: Kontan

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