Jakarta – The Value Added Tax (VAT) will increase from 11 percent to 12 percent. Tax components are a major factor in car pricing, and taxes can constitute almost half the price of a car in Indonesia.
Consumers are charged with several taxes such as Luxury Goods Tax (LGT), Value Added Tax (VAT), Vehicle Ownership Transfer Tax (BBNKB), Motor Vehicle Tax (PKB), as well as fees for issuing documents like STNK (vehicle registration), BPKB (vehicle ownership certificate), and TNKB (license plate). When totaled, these taxes can account for nearly half the price of a car.
“Our tax for low MPVs is 40 percent, with VAT at 11 percent, LGT at 15 percent, BBNKB at 12.5 percent, and PKB at 1.75 percent. So, the price of a car off-the-road is 40 percent more expensive than the on-the-road price,” said Riyanto, Senior Researcher from the Institute of Economic and Social Research at the University of Indonesia, some time ago.
Based on the above explanation, the LGT rate is determined by the Ministry of Finance Regulation (PMK) Number 141/PMK.010/2021, which outlines the types of motor vehicles subject to Luxury Goods Tax, and the procedures for imposition, granting, and management of exemptions and refunds of the tax. For instance, low MPVs (cars with a capacity under 3,000 cc and a minimum fuel consumption of 15.5 km/liter) are taxed at 15 percent, the lowest LGT rate.
Then, the VAT rate, as is known, increased to 11 percent starting from April 1, 2022. This new policy is stipulated in Law Number 7 of 2021 on Tax Regulation Harmonization (UU HPP). Next year, VAT will increase to 12 percent. This will certainly lead to a rise in car prices.
Another factor to consider is the amount of BBNKB. As we know, BBNKB rates vary between regions. For instance, DKI Jakarta, based on Regional Regulation No. 1 of 2024, sets the BBNKB rate at 12.5%.
In addition, there is the Motor Vehicle Tax (PKB), particularly in Jakarta. According to Regional Regulation No. 1 of 2024, the motor vehicle tax for the first ownership is set at 2 percent of the car’s selling price.
BBNKB is also expected to increase next year. Local governments have the authority to add additional levies on Motor Vehicle Tax (PKB) and Vehicle Ownership Transfer Tax (BBNKB), also known as “opsen.” This regulation was enacted on January 5, 2022, and will be effective three years after, which means it will be applied starting January 5, 2025.
“But what is more challenging for us is the increase in the Vehicle Ownership Transfer Tax (BBNKB) under Law No. 1 of 2022, as this increase is quite high. Currently, the rate is about 12 to 12.5 percent. If it increases to 19.5 percent or 20 percent, that’s a 6 percent increase. For a car priced at IDR 200 million, this means an increase of around IDR 12 million. For a car priced at IDR 400 million, the impact would be around IDR 24 million, plus VAT and other fees. The impact will be quite heavy,” said Yohannes Nangoi, Chairman of Gaikindo (Indonesia’s Automotive Industry Association).
When buying a car, there are usually administrative fees, in accordance with Government Regulation No. 76 of 2020 on the Types and Rates of Non-Tax State Revenue applicable to the Indonesian National Police.
- STNK issuance: IDR 200,000
- TNKB issuance: IDR 100,000
- BPKB issuance: IDR 375,000
