What If Luxury Car Tax Is Eliminated?

In 2019, rumors began to circulate about the luxury car tax being abolished by the government of the Republic of Indonesia. The new regulations regarding the Luxury Goods Sales Tax, abbreviated as PPnBM, were formulated by the government with several objectives, such as to stimulate the growth of the local automotive industry and to encourage more people to use low-emission electric vehicles.

This new regulation differs from the previous one, which assessed luxury motor vehicle tax based on engine capacity. The tax rate for luxury cars could previously reach 5%. This led many owners of luxury vehicles to evade paying their luxury vehicle tax.

The Ministry of Finance, representing the Government of Indonesia, created new regulations to reduce the PPnBM or Value Added Tax on Luxury Goods for four-wheeled vehicles to as low as 0 percent. The new proposal for the reduction of luxury car tax is set at 0%, calculated based on emission levels rather than engine capacity as before. Here are the conditions for the abolition of the luxury car tax:

1. Vehicle Engine Emissions of 0

The condition for the abolition of online motor vehicle tax is that the vehicle's emissions must reach 0. So far, only electric cars can meet the 0 emissions vehicle regulation because they do not produce any emissions at all. In addition to vehicle emissions, fuel consumption of the car is also a point of concern for the government.

If the fuel consumption is lower, then the Value Added Tax on Luxury Goods (PPnBM) will also be lower.

2. Use of Domestic Components

Although the regulations regarding the Domestic Component Level (TKDN) used are still in the early stages, the government hopes that its usage can reach 35%. This regulation applies to electric cars.

Categories of Vehicles Eligible for Luxury Goods Value Added Tax Relief

For those who previously had to pay online motor vehicle tax for luxury goods in large amounts, this issue of abolition is certainly a breath of fresh air. Here are some categories of vehicles that receive tax payment relief:

1. Electric Cars

Electric cars are the category of vehicles that receive relief from online motor vehicle tax PPnBM. The government even stipulates that electric cars are subject to a PPnBM tax rate of 0% because they do not consume fuel and do not produce carbon dioxide emissions. Moreover, since they do not consume fuel, electric cars are safer for the environment.

2. LCEV Cars

Cars with low carbon emissions or categorized as LCEV (Low Carbon Emission Vehicle) are included in the luxury cars that receive tax payment relief.

3. PHEV and FCEV Cars

Cars that fall into the category of FCEV or Fuel Cell Electric Vehicle and PHEV or Plug-in Hybrid Electric Vehicle are not subject to PPnBM tax at all. This is because these hybrid electric cars do not consume fossil fuels and do not produce any emissions.

4. KBH2 Vehicles

KBH2 vehicles, although not included in the vehicles with a 0% PPnBM tax, receive a tax reduction of up to 3 percent. Meanwhile, for Hybrid Electric Vehicles, the reduction is between 2 to 30 percent.

With the implementation of the new regulations regarding the abolition of luxury car tax specifically for low-emission and fuel-efficient vehicles, it is hoped that this will stimulate more automotive industries operating in this field. Thus, the environment will be cleaner from pollution.

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