Indonesia Extends EV Tax Incentives in 2025 to Drive Green Investment and Local Manufacturing

“There is no Planet B.”
The famous words of French President Emmanuel Macron continue to resonate as the world races against climate change. For Indonesia, the shift toward clean energy and sustainable industries is not just an environmental necessity—it is a strategic economic move.

One of the government’s flagship initiatives in 2025 is the extension of tax incentives for battery electric vehicles (KBLBB). This policy is designed to accelerate EV adoption, strengthen domestic manufacturing, and position Indonesia as a key player in the regional electric mobility market.

The electric vehicle market in Indonesia has grown significantly in recent years.
According to the Association of Indonesia Automotive Industry (GAIKINDO), 2024 saw the sale of 24,704 domestically produced passenger EVs and 18,489 imported EVs, for a total of 37,619 units—a 73% increase from 2023. The market share of EVs in passenger vehicle sales has risen from 1.3% in 2022 to 6.25% in 2024.

Under the Minister of Finance Regulation No. 12/2025, the government continues the VAT Borne by the Government (PPN DTP) scheme for locally produced EVs:

10% VAT borne by the government for EVs with a Domestic Component Level (TKDN) ?40%

5% VAT borne by the government for EVs with TKDN between 20%–40%

The policy applies from January to December 2025 and aims to support local production, encourage technological investment, and make EVs more affordable for consumers.

In addition, Minister of Finance Regulation No. 9/2024 provides:

15% Luxury Sales Tax (PPnBM DTP) for imported EVs (both CBU and CKD)

Import duty exemptions under Free Trade Agreements (FTA) and Comprehensive Economic Partnership Agreements (CEPA)

Hybrid vehicles under the Low Carbon Emission Vehicle (LCEV) program also enjoy a 3% PPnBM DTP incentive.

The incentive package goes beyond vehicle sales, providing targeted support for labor-intensive industries in the EV supply chain:

Income Tax Article 21 borne by the government for employees earning up to IDR 10 million/month

5% interest subsidies for machinery revitalization

50% subsidies for work accident insurance for six months

These measures aim to build a competitive EV industry while creating green jobs across Indonesia.

To streamline processes, low-risk taxable entrepreneurs (PKP) are eligible for fast-track VAT refunds without prior request, provided they meet specific compliance criteria under Minister of Finance Regulation No. 39/PMK.03/2018.

Indonesia’s EV tax policy is in line with international leaders in clean mobility:

Norway exempts EVs entirely from VAT and import duties, with EVs making up over 80% of new car sales in 2024.

China offers purchase subsidies, lower registration fees, and strong R&D support for local production.

United States grants tax credits up to USD 7,500 under the Inflation Reduction Act, tied to domestic content and assembly rules—similar to Indonesia’s TKDN approach.

By combining consumer incentives with local manufacturing requirements, Indonesia is not only driving EV adoption but also building an ecosystem that supports technology transfer, industrial investment, and sustainable growth.

With global demand for clean transportation surging, these policies reinforce Indonesia’s position as a rising force in the regional EV industry—offering opportunities for investors, manufacturers, and innovators alike.

Source: Directorate General of Taxes