Jakarta – The 12% VAT rate is proposed to apply only to luxury goods. For vehicles, it is suggested that the tax will only be imposed on luxury cars.
The Indonesian House of Representatives (DPR) has proposed that the 12% Value Added Tax (VAT), which will be implemented starting in January 2025, will only apply to luxury goods. Deputy Chairman of the DPR, Sufmi Dasco, stated that some of these luxury items include cars, luxury apartments, and luxury houses.
“Luxury cars, luxury apartments, luxury homes, all things that are considered luxury,” Dasco said, as quoted by CNBC Indonesia.
Meanwhile, essential goods and services that directly affect the public will still be subject to an 11% tax. Dasco did not elaborate on the specific types of luxury cars being referred to. However, it is known that certain vehicles are subject to the Luxury Goods Tax (LGT) as outlined in the Minister of Finance Regulation No. 141/PMK.010/2021 regarding the Determination of Types of Motor Vehicles Subject to Luxury Goods Tax and the Procedures for Granting and Managing Exemptions and Refunds of Luxury Goods Tax.
Article 2 of this regulation explains that luxury goods subject to tax include motor vehicles designed to transport fewer than 10 people, including the driver, with an engine capacity of up to 3,000 cc, which are subject to the following LGT rates: a. 15% (fifteen percent); b. 20% (twenty percent); c. 25% (twenty-five percent); or d. 40% (forty percent).
Further, Article 3 states that luxury goods subject to tax also include motor vehicles designed to transport fewer than 10 people, including the driver, with an engine capacity of more than 3,000 cc up to 4,000 cc, which are subject to the following LGT rates: a. 40% (forty percent); b. 50% (fifty percent); c. 60% (sixty percent); or d. 70% (seventy percent).
In addition to four-wheel vehicles, there are also other motor vehicles considered luxury goods under Articles 22 and 23, with the following details:
Article 22
- Motor vehicles with 2 or 3 wheels, with an engine capacity of more than 250 cc up to 500 cc; or
- Special vehicles designed for travel on snow, beaches, mountains, or similar terrains, which are subject to an LGT rate of 60%.
Article 23 Luxury goods also include: a. Motor vehicles with an engine capacity of more than 4,000 cc; b. Motor vehicles with 2 or 3 wheels with an engine capacity of more than 500 cc; or c. Trailers, semi-trailers, and caravan-type trailers for housing or camping, which are subject to an LGT rate of 95%.
