The Government of Indonesia has passed a new emissions-based luxury tax (PPnBM) on cars with the intention of boosting demand for lower-emission vehicles in the country. Government Regulation (PP) No. 73/2019 has gone into effect after two years since it was issued. Under the new regulations, higher luxury tax rates will be imposed on cars with larger engine capacities and higher tailpipe carbon dioxide (CO2) emissions, measured in CO2 g/km.
The new legislation sets a PPnBM rate of zero per cent for electric vehicles (EVs) and between two to 12 per cent for hybrid cars, increasing the rate from zero to three per cent for low-cost green cars (LCGCs). The regulation will charge between 15 to 40 per cent for conventional fossil-fuel powered automobiles.
The new emission tax is a part of the Government of Indonesia’s efforts to reduce oil imports, carbon emission and attract foreign investment, although EV adoption rates in the country are still at around 0.04 percent of the 2025 objective.
