Luxury goods sales tax reduction granted for motor vehicles

In an effort to stimulate production and sales in the automotive sector, the Indonesian government has announced a temporary reduction in the Luxury Goods Sales Tax (LST) for certain vehicles, which applies for the period 1 April 2021 through 31 December 2021. The LST rates currently range from 10% to 40%, depending on the vehicle.

Vehicles that qualify for the reduction include the following:

• Sedans or station wagons with spark ignition or compression ignition engines (diesel or semi-diesel) with cylinder capacity up to 1,500 cc; and
• Vehicles for transportation of fewer than 10 persons (including the driver) other than sedans or station wagons, with spark ignition or compression ignition engines (diesel or semi-diesel) that meet the following criteria:

a. vehicles with a one-drive axle system (4x2) with cylinder capacity of up to 1,500 cc or 1,500 cc up to 2,500 cc; and

b. vehicles with a two-drive axle system (4x4) with cylinder capacity of 1,500 cc up to 2,500 cc.

The government will bear the cost of the LST if the vehicle fulfils certain requirements, including having at least 60% domestic production components, as follows:

Irwan Kusumanto
ikusumanto@bdo.co.id  

Suwenny Leonardi
sleonardi@bdo.co.id                                        

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