Misconceptions About Electric Vehicle Tax Exemptions

Recently, there has been widespread coverage regarding changes to tax regulations for electric vehicles. In the circulating narrative, it is reported that electric cars and motorcycles will no longer be exempt from regional taxes following the issuance of Ministry of Home Affairs Regulation (Permendagri) No. 11/2026. Until now, electric vehicles have received exemptions from annual motor vehicle tax (PKB) and vehicle transfer tax (BBNKB) upon purchase. The incentive programme has been in place since 2023. However, the implementation of Permendagri No. 11/2026 from 1 April 2026 is said to end this incentive policy. The reason is that electric vehicles are no longer listed in the types of vehicles exempt from PKB and BBNKB in Article 3 of the regulation. In the previous regulation, Permendagri No. 7/2025 specifically listed renewable energy-based vehicles as one of the types not subject to PKB and BBNKB. Electric vehicles were designated as included in that category of renewable energy vehicles. If referring to subsequent articles in the same Permendagri, the statement is not entirely accurate. In Article 19 of Permendagri No. 11/2026, there is a clause stating that the provision of annual tax incentives and vehicle transfer fees for electric vehicles shall be in accordance with applicable legislation. This clause is new, as it did not exist in the previous Permendagri. If interpreted, the omission of the phrase “electric vehicles” from the list of tax exemptions in Article 3 does not necessarily mean they no longer receive tax exemptions. The incentive rules now only refer to policies higher than this Permendagri. In this case, the higher rules are in Law No. 1/2022 on Financial Relations between the Central Government and Regions (UU HKPD). The law is further reinforced by Presidential Regulation (Perpres) No. 55/2019, last amended by Perpres No. 79/2023. In Perpres No. 79/2023, there is an instruction for regional governments to provide incentives for electric vehicles in Article 17. Then, Article 19 stipulates that these incentives are provided in the form of exemptions or reductions in annual PKB tax and BBNKB fees, which are under the authority of regional governments.