New Car Purchase is Proposed to Be Tax-Free

Friday, 25 September 2020

New Car Purchase is Proposed to Be Tax-Free

JAKARTA. The government plans to exempt taxes on the purchase of new car, to encourage the automotive industry to be depressed by the Coronavirus Disease 2019 (Covid-19) pandemic. The proposal for the provision of this facility was delieveres by the Ministry of Industry.

The incentive stipulated in the form of exemption from Sales Tax on Luxury Goods (PPnBM), which is currently set between 10% to 125% as stated in Regulation of the Minister of Finance (PMK) number 64/PMK.011/2014.

Quoting, the Ministry of Industry considers that the presence of PPnBM has a very strong influence on the determination of the selling price of vehicles between 20% -40%.  Therefore, if it is tax-free, the selling price will decrease, so that it can increase the demand.

As an illustration, during the period of January-August 2020 national car sales decreased by 45% from the same period in 2019. This condition has a domino effect, as it forces the company to reduce production.

For information, based on the current regulations, several types of vehicles have also received PPnBM exemption on import and delivery, such as:

  1. Ambulances, hearses, fire engines, prisoner transport vehicles, public transportation.
  2. State protocol vehicle
  3. Passenger vehicle for 10 to 15 persons
  4. Military patrol vehicle or Police patrol vehicles

Still in The Calculation Process

The Ministry of Finance claims to have known about the proposed tax relaxation. However, the institution that in charge of the fiscal policy does not want to rush to decide.

Quoting, there are several things that still need to be reviewed. First, the Ministry of Finance wants to ensure that the provision of new car tax incentive will have a significant impact on the national economy. One of them is by looking at the contribution of increasing vehicle sales due to the provision of incentive to Gross Domestic Product (GDP).

Another thing to consider is the details of the policy whether it will only be imposed on domestically produced cars or also imported cars.


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