The Government of Indonesia has recently updated the regulatory framework on vehicle taxation through Minister of Home Affairs Regulation No. 11 of 2026 on the Tax Base for Motor Vehicle Tax, Motor Vehicle Title Transfer Fee, and Heavy Equipment Tax (Regulation 11/2026). This regulation replaces Minister of Home Affairs Regulation No. 8 of 2024 and introduces a range of amendments, covering both substantive provisions in the main body and revisions to the vehicle classifications set out in its annexes. As an implementing regulation of Law No. 1 of 2022 on Fiscal Relations between the Central Government and Regional Governments (Law 1/2022), it serves as the principal reference for regional governments across Indonesia in determining the calculation of Motor Vehicle Tax (Pajak Kendaraan Bermotor or PKB), Motor Vehicle Title Transfer Fee (Bea Balik Nama Kendaraan Bermotor or BBNKB), and Heavy Equipment Tax (Pajak Alat Berat or PAB), thereby playing a central role in shaping the practical application of regional taxation in the automotive sector.
The updated regulation contains a considerably broader list of vehicles. In addition to extending coverage to production years up to 2026, it also incorporates a substantial expansion in the classification of battery electric vehicles. Rapid technological advancement has significantly transformed various aspects of human life, including the transportation sector, which has evolved from fossil fuel-based vehicles to modern electric mobility solutions. In line with global efforts to reduce carbon emissions, Indonesia has actively promoted the development and adoption of electric vehicles by engaging major automotive manufacturers and providing fiscal incentives alongside infrastructure support. This policy direction is reflected in the increasing presence of electric vehicles on public roads and the notable growth in sales, indicating a promising and expanding market. The government has further reinforced this ecosystem through the development of public charging infrastructure (SPKLU), support for the domestic component industry, and the use of electric vehicles in official state functions.
With the enactment of Regulation 11/2026, there is a potential shift in policy whereby regional governments may exercise its policy authority granted by the regulation to reduce and/or revoke incentives for battery-based electric vehicles that were previously granted to and enjoyed by consumers. Specifically, Regulation 11/2026 provides that the Sales Value of Motor Vehicles (Nilai Jual Kendaraan Bermotor or NJKB) and the Sales Value of Heavy Equipment (Nilai Jual Alat Berat or NJAB) shall be used as the basis for the imposition of PKB, BBNKB, and PAB for motor vehicles and/or heavy equipment entering the customs territory of Indonesia through free trade zones and free ports, which shall be further regulated under a regulation issued by governor.
Historically, incentives in the form of exemptions or reductions in PKB and BBNKB have been grounded in the national policy framework aimed at accelerating the adoption of electric vehicles. Any removal or reduction of these incentives may result in higher effective vehicle prices, as consumers would no longer benefit from tax relief mechanisms. This regulation marks an important shift in the allocation of fiscal authority, particularly in relation to how incentives for electric vehicles are designed and implemented at the regional level.
From a legal standpoint, the basis for granting such PKB and BBNKB incentives can be found in Law 1/2022. In particular, Article 7 paragraph (3) letter (d) and Article 12 paragraph (3) letter (d) provide that ownership and/or transfer of motor vehicles powered by renewable energy are excluded from the objects of PKB and BBNKB, respectively. These provisions suggest that electric vehicles are, in principle, not subject to such regional taxes.
However, it should be noted that neither Law 1/2022 nor its implementing regulations provide a clear definition of what constitutes “motor vehicles powered by renewable energy.” Notwithstanding the absence of such definition, in practice, the Government has granted the incentives to electric vehicles on this basis.
Shortly after the enactment of Regulation 11/2026, the Minister of Home Affairs issued Circular Letter No. 900.1.13.1/3764/SJ on the Provision of Fiscal Incentives in the form of Exemption from Motor Vehicle Tax (PKB) and Motor Vehicle Title Transfer Fee (BBNKB) for Battery-Based Electric Motor Vehicles (Circular Letter). This Circular Letter governs the granting of incentives for electric vehicles, with the objective of enhancing energy efficiency, strengthening energy security, promoting energy conservation in the transportation sector, and supporting the transition toward clean energy while maintaining environmentally sustainable air quality. The issuance of this instruction also takes into account global economic dynamics, particularly the instability in the availability and pricing of energy resources, which has had an impact on domestic economic condition.
With respect to the provisions under Regulation 11/2026 and the aforementioned Circular Letter, officials of the Ministry of Home Affairs have clarified that the interpretation of these regulations is that owners of electric vehicles are still required to fulfil their administrative obligations, including the registration and renewal of motor vehicle tax. However, at the point of such registration or renewal, fiscal incentives will be applied, resulting in the payable amount of the PKB and BBNKB being effectively reduced to zero.
Conclusion
In light of the foregoing, Regulation 11/2026—which appears to grant regional governments discretion to reduce or withdraw incentives for electric vehicles—raises a legal question as to its consistency with the higher-ranking statutory framework. Given the absence of a clear statutory definition of “motor vehicles powered by renewable energy,” this issue may fall within a regulatory grey area, leaving room for differing interpretations by policymakers and regional authorities. This ambiguity creates potential uncertainty as to whether electric vehicles should continue to benefit from such exclusions as a matter of right or as a matter of policy discretion.
However, shortly thereafter, the Government, through the Minister of Home Affairs, issued the Circular Letter, which provides further clarification on the intended implementation of the regulatory framework. Officials of the Ministry of Home Affairs have explained that, notwithstanding the formal obligation of electric vehicle owners to comply with administrative requirements—such as tax registration and renewal—the applicable fiscal incentives are to be applied at the point of assessment, effectively reducing the payable amount of PKB and BBNKB to zero. While the Circular Letter does not amend the underlying regulatory provisions, it serves as an interpretative guidance aimed at ensuring a uniform approach across regional governments, thereby mitigating the risk of inconsistent application and partially addressing the regulatory uncertainty arising from Regulation 11/2026.
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MetaLAW, Legal Consultant, Jakarta, Indonesia
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