Key Takeaways from Indonesia’s New EV Subsidy Policy

TRACY MA | 2024/04/12

Following our earlier post “To Win Indonesia Is to Win Southeast Asia: Inside the Fiercely Competitive New Battleground for Chinese EVs”, we received many inquiries from industry peers about Indonesia’s latest EV subsidy policy—particularly the new regulation issued in February 2024: Finance Minister Regulation No. 8. Below is a summary of the key highlights, prepared by our team.

Finance Minister Regulation No. 8 of 2024: VAT Incentives for Four-Wheel and Public Electric Vehicles (BEVs)

The Indonesian Ministry of Finance has issued Regulation No. 8 to govern value-added tax (VAT) policies for four-wheel battery electric vehicles (BEVs) and electric public buses in 2024. Key points include:

Purpose of the Regulation:

The regulation aims to support Indonesia’s energy transition from fossil fuels to electric power by boosting public interest in EVs. It is part of the government’s broader 2024 EV roadmap, providing fiscal incentives in the form of VAT subsidies.
Policy Continuity:

This regulation builds on previous measures under Regulations No. 38 and No. 116 issued in 2023, reaffirming the government’s ongoing commitment to supporting EV adoption via tax incentives.
Scope of Application:

The VAT subsidy applies to eligible four-wheel EVs and electric public buses transferred to buyers and intended for registration as new motor vehicles under Indonesian law.
VAT Structure:

The standard VAT rate is 11% of the selling price. However, the government offers partial or full VAT coverage based on the vehicle’s local content level (TKDN - Tingkat Komponen Dalam Negeri).
- Vehicles with ≥ 40% local content: 10% VAT subsidy
- Public buses with 20–40% local content: 5% VAT subsidy
Tax Invoice & Compliance:

Sellers are required to issue invoices according to specific codes depending on vehicle type and VAT eligibility. The regulation also provides detailed compliance guidelines to ensure transparency and accountability in VAT declaration.
Implementation Period:

The policy is valid for the 2024 fiscal year. All related tax filings must be completed by January 31, 2025.

Important Clauses: Pasal (Articles) 3 & 4 – Local Content Requirements & VAT Subsidies

🔹 Article 3 – TKDN Thresholds

All eligible four-wheel BEVs and electric public buses must meet minimum local content requirements.
The TKDN thresholds are:
- BEVs: minimum 40%
- Public electric buses: minimum 40%
- Partial subsidy: public buses with 20–40% TKDN
The relevant Minister in charge of industry will verify and approve compliance with these requirements.

🔹 Article 4 – VAT Application & Subsidy Coverage

The standard VAT for eligible BEVs and buses is 11%.
The government will subsidize 10% of VAT for vehicles meeting the ≥ 40% TKDN requirement.
The government will subsidize 5% of VAT for electric buses with 20–40% local content.

Summary & Takeaways

These incentives are designed to accelerate EV adoption while supporting domestic supply chains. By tying subsidies to TKDN levels, the Indonesian government encourages automakers to localize production—making it more affordable for companies and consumers to embrace electric mobility in alignment with sustainability goals.

For businesses involved in the EV sector and exploring expansion into Indonesia, this regulation provides clear guidelines and financial benefits. The official document also includes specific case examples toward the end to help companies and consumers better understand how the VAT subsidy works in practice.