Jakarta. In a move to boost the adoption of electric vehicles (EVs), the Ministry of Finance has announced an extension of value-added tax (VAT) incentives for electric cars. The previous program, which concluded in December 2023, will now be prolonged until December 2024.

The government has set the VAT for electric cars and buses at 11 percent under the recently issued Finance Ministry Regulation (PMK) No. 8 of 2024. In a move to incentivize consumers, the government decided to cover 10 percent of the VAT burden. As a result, consumers will only be required to pay 1 percent of the VAT on the selling price of electric cars.

This reduction is applicable provided that the electric vehicle incorporates 40 percent locally-made components. Currently, only the Hyundai Ioniq 5 and Wuling Air EV are eligible for the incentive.

On the other hand, electric buses containing a local component ranging from 20 percent to less than 40 percent will receive a 5 percent VAT subsidy from the government. This means that bus owners will only be responsible for paying 6 percent VAT.

"To support the government's policy in shifting from fossil fuel to electric energy and to enhance public interest in battery-powered electric motor vehicles, along with backing the 2024 battery-powered electric motor vehicle program, government support in the form of fiscal incentives is deemed necessary," Finance Minister Sri Mulyani said in a statement on Tuesday.

The incentive is applicable for the tax period from January 2024 to December 2024.

The Indonesian Automotive Industry Association (Gaikindo), reports a surge in electric car sales in December 2023, reaching approximately 3.200 units, a 65 percent increase compared to November 2023 and a 33 percent rise compared to December 2022.