Indonesian government offers VAT incentives for homebuyers in 2024
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Indonesian government offers VAT incentives for homebuyers in 2024

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Jeklira Tampubolon and Julius Wahyu Daryono of GNV Consulting Services report on fresh VAT incentives designed to stimulate investment in the housing sector, and several regulations that are intended to boost electric vehicle adoption

On February 12 2024, the Indonesian Ministry of Finance (MoF) issued a new regulation, No. 7 of 2024, regarding the Incentive of Value Added Tax Borne by the Government for Landed Houses and Residential Units (MoF-7/2024), with the aim of stimulating the housing market in Indonesia. The government is seeking to enhance the purchasing power of individuals by offering VAT incentives, encouraging investment in the housing sector, and fostering economic growth. This programme builds upon the success of a similar initiative implemented in the previous year.

This regulation offers VAT incentives in which the government will bear the VAT on purchases of landed houses and residential units. The VAT incentive is a partial or complete reduction of the tax for eligible properties; i.e., the purchase of new, ready-to-use landed houses and residential units with a maximum selling price of IDR 5 billion.

The programme is valid from January 1 2024 to December 31 2024. However, the level of the VAT incentive varies depending on the handover date, as follows:

An early bird incentive (January 1 2024–June 30 2024) – purchasers who complete sale and purchase agreements or fully paid agreements and receive the official handover report within this period are entitled to 100% coverage of the VAT on the tax base up to IDR 2 billion; and

A standard incentive (July 1 2024–December 31 2024) – purchasers completing the documentation above and receiving the handover report during this period will receive 50% VAT coverage up to IDR 2 billion on the tax base.

Individuals who previously availed of the VAT incentive programme under MoF Regulation No. 120/2023 are still eligible to participate in the new programme. Additionally, those who utilised a portion of the previous incentive and have outstanding VAT payments due in 2024 can apply the remaining benefit to those payments.

Tax and customs incentives for battery-powered electric vehicles

On February 12 2024, the MoF announced a series of new regulations to boost electric vehicle (EV) adoption. The regulations took effect three days after the regulations’ issuance date and offer significant tax breaks for imported and domestically produced EVs.

Under the new measures, the government bears the VAT on the delivery of certain EVs, according to MoF Regulation No. 8/2024. MoF Regulation No. 9/2024 introduces similar benefits for luxury EVs, offering a break on the luxury-goods sales tax (LST) for imports and deliveries. These incentives apply throughout 2024.

MoF Regulation No. 10/2024 further boosts the EV market by slashing import duty rates to 0% on all imported EVs. This attractive incentive will be in effect until December 31 2025.

These new MoF regulations are expected to significantly reduce the cost of EVs for Indonesian consumers, potentially accelerating the transition towards a more sustainable transportation sector.

MoF Regulation No. 8/2024

The government has introduced a VAT incentive for battery-powered electric motor vehicles to promote the use of electric energy and reduce reliance on fossil fuels. The incentive will apply from January to December 2024. To qualify for the incentive, certain four-wheeled battery-based electric motor vehicles and/or specific battery-based electric motor bus vehicles must meet the domestic component level (TKDN) criteria, with thresholds of 20% and 40%.

The government will bear the VAT cost until December 2024 if the following conditions are met:

  • If the four-wheeled battery-based EV and/or eligible battery-based electric bus vehicle meets the TKDN value criteria with a minimum of 40%, the VAT incentive is 10% of the selling price; and

  • If the battery-based electric bus vehicle meets the TKDN value criteria in the range of 20%–40%, the VAT incentive is 5% of the selling price.

The Indonesian tax authority can still collect the VAT payable if the below data/information is obtained:

  • The EV is not a brand new vehicle and is not registered with the Ministry of Industry;

  • The EV does not meet the TKDN value criteria;

  • The VAT incentive implementation is before January 2024 or after December 2024; or

  • The taxable enterprise fails to produce tax invoices and/or submit a realisation report.

Lastly, the reporting and amendment of the monthly VAT returns for January to December 2024 can be regarded as realisation reports, provided they are submitted by January 31 2025.

MoF Regulation No. 9/2024

In 2024, the Indonesian government will offer tax incentives to enterprises that import or deliver luxury EVs. These incentives will cover completely built-up and completely knocked-down battery-based EVs with four wheels. From January to December 2024, the government will cover 100% of luxury EVs' LST.

MoF-9/2024 stipulates that fulfilment of the incentive period is proven by:

  • The date of registration of the import declaration (Pemberitahuan Impor Barang, or PIB) documents, for imports of certain four-wheeled completely built-up EVs; or

  • The LST invoice date, for the delivery of certain four-wheeled EVs.

The Indonesian tax authority can still collect the VAT payable. This applies if the necessary approval documentation is unavailable or the imported EVs do not comply with the regulations. Additionally, enterprises must create an import declaration and an incentive realisation report, and issue the tax invoice accordingly.

As with MoF Regulation No. 8/2024, the reporting and amendment of the monthly LST returns on the importation/delivery of certain luxury EVs from January to December 2024 can be treated as realisation reports if submitted by January 31 2025.

MoF Regulation No. 10/2024

This regulation includes an additional section that outlines the procedures, terms, and regulations regarding the importation of battery-based electric motorised vehicles in the battery EV programme, including incentives in terms of import duty rates. This aims to encourage a transition from fossil energy to electric energy, attract investment, and increase domestic production of battery-based electric motorised vehicles, while ensuring compliance with the regulatory framework.

The salient points of this regulation are as follows:

Import duty rates – a tariff post subject to 0% import duty has been established until December 31 2025. This tariff post covers types of battery-based electric motorised vehicles, which are included in tariff lines 8703.80.17, 8703.80.18, and 8703.80.19, and tariff lines 8703.80.97, 8703.80.98, and 8703.80.99. This import duty rate applies to the importation of battery-powered electric motorised vehicles by business entities that meet the criteria set forth in Regulation No. 6 of 2023 issued by the minister of investment/head of the Investment Coordinating Board (BKPM).

Terms of use of import duty tariffs – to enjoy the import duty incentive, importers must fulfil the following conditions:

Attach a letter of approval for import incentives and/or the delivery of four-wheeled battery-based electric motor vehicles issued by the Ministry of Investment/BKPM; and

Include facility code 87 for approval of the use of incentives for import/delivery of four-wheeled battery-based electric motor vehicles in the column regarding fulfilment of import requirements/facilities in the PIB document.

Validation process – the Indonesian National Single Window System validates data elements in goods import notification documents. If the validation results are inappropriate, the system returns the document to the importer for correction.

Manual procedures – customs officers will conduct research and withhold manually if the withholding process cannot be completed using the Indonesian National Single Window System.

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