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Indonesia's luxury car sales tax in effect

Staff writer |
Indonesian Ministry of Finance has issued regulations to implement the hike Indonesia's luxury car sales tax by 50 percent. The regulation came into effect on April 17, 2014.

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Deliveries or imports of certain manufactured goods in Indonesia are subject to luxury-goods sales tax (LCT), in addition to value added tax. According to the tax code, LST rates can be increased to up to 200 percent, but currently rates range between 10 percent and 75 percent.

That highest 75 percent rate is currently applied to luxury cars – gasoline and diesel motor vehicles with 3,000cc engines and 2,500cc engines, respectively. That tax rate has now been increased that by another two-thirds to 125 percent.

The Minister of Finance Chatib Basri has previously emphasized that the increase in the luxury tax for motor vehicles is intended to reduce consumption and improve Indonesia's trade deficit. It is not, he said, aimed at increasing tax revenues, and may in fact lead to a decline if the policy is successful.

On the other hand, it is expected that luxury car importers will look to reduce the impact of the tax on their market, most probably with an increased supply of vehicles with gasoline engines of just below the 3,000cc level.

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