Effective in April, VAT Incentives for Electric Cars and Buses Released

The government will bear the Value Added Tax (VAT) payable on the transfer of certain battery-based electric cars and buses, from the tax period of April 2023 to December 2023. This is the government's effort to encourage the electric-based vehicle industry in Indonesia.

The amount of VAT that will be borne and burdened by the 2023 State Budget (APBN) will be determined based on the type of Domestic Component Level (TKDN).

This means that the greater the domestic component level contained, the greater the amount of VAT borne. This is stated in the Minister of Finance Regulation (PMK) Number 38 of 2023.

The regulation states that if the domestic component level of electric cars and buses is 40% and above, the amount of VAT payable that will be borne by the government is 10% of the selling price.

Thus, if the current VAT rate is 11%, then the transfer of electric cars and electric buses will only be subject to VAT of 1% of the selling price.

Meanwhile, for electric cars and buses that have domestic component level from 20% to less than 40%, the amount of VAT payable that will be borne is only 5% of the selling price, so the VAT payable that must be deducted is 6% of the selling price.

Domestic Component Level	Government-borne VAT???????	VAT payable (deducted)
40%≤	10% of selling price	1% of selling price
20 < 40%	5% of selling price	6% of selling price

Split Tax Invoice

VAT-Registered Persons who transfer electric cars and buses with government -borne VAT facility are required to issue a tax invoice. The taxpayers need to remember that the tax invoice must be made separately between the part of the tax borne by the government and that deducted from the buyer.

For example, for a VAT-Registered Person who receives a government-borne VAT payable facility of 10% of the selling price, need to make the following invoices:

• Make a tax invoice with transaction code 01 for the VAT portion of 1/11 of the selling price (not borne by the government).
• Make a tax invoice with transaction code 07 for the 10/11 portion of the selling price (borne by the government).

For VAT-Registered Person who get government -borne VAT payable facility of 5% of the selling price, need to make the following invoices:

• Make a tax invoice with transaction code 01 for the VAT portion of 6/11 of the selling price (not borne by the government).
• Make a tax invoice with transaction code 07 for the portion of 5/11 of the selling price (borne by the government).

The tax invoice must also be accompanied by a description of the type of goods including; brand, type, variant and vehicle frame number. In addition, it must include additional information: "VAT Borne by the Government According to PMK Number.. Year 2023 worth IDR.."

It should be noted, VAT-Registered Person who utilizes this facility cannot credit the VAT borne by the government in the Periodic Tax Return. 

Realization Report

Another obligation of VAT-Registered Person that obtains this facility is to submit a report on the realization of VAT borne by the government in the Periodic VAT Return.

The report on the realization of government-borne VAT for the April tax period until the December 2023 tax period can be submitted no later than 31 January 2023.

The more detailed provisions regarding certain types of battery-powered electric cars and buses that will get this facility will be regulated by the Ministry of Industry.

The government emphasized that if the VAT-Registered Person does not make an invoice or does not report the realization, the VAT facility borne by the government is not applicable. Thus, all taxes payable on the transfer of electric cars and buses must be paid. (ASP/KEN)