ANNOUNCEMENT 17 Apr 2014In April 2014, the government of Indonesia announced a change to the import-specific domestic duties.
NUMBER OF INTERVENTIONS
On 17 April 2014, Indonesia increased the luxury-goods sales tax (LCT) from 75 per cent to 125 per cent. All so-called luxury cars are subject to the tax increase. The regulation defines luxury cars as vehicles with a gasoline engine of 3,000 cc and more or a diesel engine of 2,500 cc and more. Furthermore, motorbikes with more than 500 cc also fall under the new tax.
In theory, this measure does not discriminate between importers and local producers. Nevertheless the affected models are all cars from international brands like Jaguar, Land Rover, Lexus, Bentley because their products do entirely exceed the 2,500/3,000 cc limit. Consequently, the measure is very likely to target international brands only because these brands can not deliver cars that would be conforming to the new requirements, while Indonesian producers can. because they have smaller engines in their portfolio.
Therefore, this measure is selective and does, in reality, discriminate against certain importers. The Indonesian government confirms this view by stating that 'the tax is intended to curb import consumption as means to lower the countrys trade deficit.' (see aseanbriefing source)
On 13 October 2021, Indonesia issued the Ministry of Finance Regulation No.141/PMK.010/2021 reducing VAT on luxury goods (PPNBM) from 125% (see related Act) to between 20% - 95% depending on the type of gasoline engine and carbon emission level for the importation of luxury cars (see related Act).