EV Tax Rules Eased to Attract Investment

Michael Elkins, reporting for Investing.com, writes that the Indonesian government released details of new regulations, signed on Friday (8/12/23,) designed to attract investors looking to build electric vehicle (EV) plants in the country.

The new regulations will grant automakers that plan to build electric vehicle plants tax incentives on their imports of completely built EVs until 2025.

Under the plan, companies that have already invested in EV plants, intend to boost their EV investments, or have plans for future investments in this sector would qualify for the incentives, report Investing.com, adding that the updated regulations will eliminate import duties and luxury-goods sales tax on fully assembled vehicles imported into the country.

It’s worth noting that these rules offer tax incentives tied to taxes collected by provincial governments.

Previously, these incentives were exclusively allocated to imports of knocked-down vehicles, which are delivered in parts and then assembled within the country of sale.

Investing.com says that despite this, the quantity of vehicles companies can import will be contingent upon the scale of investment and the developmental progress of the plant. Import volumes must also receive approval from the investment ministry.

“We try to be progressive, because once we have created an EV industry in Indonesia, the battery (industry) will also come, and we already have the (raw) material and can create the supply chain,” said Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs.

The updated regulations also extended deadlines relating to the production of EVs in Indonesia. The requirement for companies to manufacture a minimum of 40-percent of EV content within the country has been postponed from 2023 to 2026, say Investing.com

Additionally, the plan has pushed back an increase of the local content threshold to 60-percent. Instead of the original goal of achieving this by 2024, it has been rescheduled to 2027.

Indonesia’s government has set an ambitious goal of manufacturing approximately 600,000-electric vehicles in the country by 2030, which is 100x the number of EVs sold in Indonesia during the first half of 2023.

Source: Investing.com

Stock image by Tom Fisk on Pexels 

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