Circular Letter of the Minister of Home Affairs Number 900.1.13.1/3764/SJ Requires Governors to Grant Exemptions for Motor Vehicle Tax and Motor Vehicle Title Transfer Fee for Electric Vehicles by May 31, 2026

Introduction

On April 22, 2026, the Minister of Home Affairs issued Circular Letter of the Minister of Home Affairs Number 900.1.13.1/3764/SJ on the Provision of Fiscal Incentives in the Form of Exemption of Motor Vehicle Tax and Transfer of Motor Vehicle Title Fee for Battery Electric Motor Vehicles (“CL 900.1.13.1/3764/SJ”). CL 900.1.13.1/3764/SJ regulates the obligations of Governors to provide fiscal and non-fiscal incentives to support the Battery Electric Motor Vehicle (Kendaraan Bermotor Listrik, “KBL”) program in the road transportation sector.

CL 900.1.13.1/3764/SJ is issued pursuant to Presidential Regulation Number 79 of 2023 on the Acceleration of the Battery Electric Motor Vehicle Program for Road Transportation (“Perpres 79/2023”) and Regulation of the Minister of Home Affairs Number 11 of 2026 on the Base for Imposition of Motor Vehicle Tax, Transfer of Motor Vehicle Title Fee, and Heavy Equipment Tax (“Permendagri 11/2026”). CL 900.1.13.1/3764/SJ was issued by taking into account global economic conditions affecting the prices and availability of fossil energy (oil and gas). In this context, the government regulates the provision of incentives to support the use of Battery Electric Motor Vehicles, as well as to promote energy efficiency and improve air quality. For regional governments, this circular letter stipulates the obligation to provide incentives as part of the implementation of the national energy conservation policy.

Key Provisions

Obligation to Provide Fiscal and Non-Fiscal Incentives

Point 2 letters a and b regulate the obligation of the Regional Government to provide incentives alongside the Central Government to support the implementation of the Battery Electric Motor Vehicle (KBL) program. These incentives include fiscal and non-fiscal incentives as stipulated in Article 17 paragraph (2) of Perpres 79/2023. For companies, this provision opens access to facilities beyond tax exemptions in accordance with the respective regional policies.

Exemption or Reduction of PKB and BBNKB for Various Production Years

Under Point 2 letter e, the provision of local tax exemption or reduction incentives in the form of Motor Vehicle Tax (Pajak Kendaraan Bermotor, “PKB”) and Transfer of Motor Vehicle Title Fee (Bea Balik Nama Kendaraan Bermotor, “BBNKB”) applies to vehicles manufactured in 2026 or earlier; furthermore, Article 19 of Permendagri 11/2026 regulates the provision of local tax exemption or reduction incentives in the form of PKB and BBNKB for Battery Electric Motor Vehicles. This provision provides the legal basis for the procurement of new electric vehicles and the ownership of existing vehicles to be exempted from or receive a reduction in the annual Motor Vehicle Tax as well as the Transfer of Motor Vehicle Title Fee.

Fiscal Facilities for Converted Vehicles

Vehicles that have been converted from fossil fuels into Battery Electric Motor Vehicles receive PKB and BBNKB exemption or reduction incentives, as set forth in Point 2 letter f, which refers to Article 19 paragraph (3) of Permendagri 11/2026. This provision places converted vehicles under the same tax treatment as new electric vehicles. For transportation businesses, this provision enables the adjustment of fleets from conventional vehicles to electric vehicles with local tax exemption or reduction facilities.

Prohibition of Abuse of Authority and Corrupt Practices

All regional agencies must avoid any abuse of authority in implementing fiscal incentive provisions, as stipulated in Point 2 letter g. This provision prohibits transactional practices as well as collusion, corruption, and nepotism in processing electric vehicle tax exemptions. For companies, this provision ensures the incentive provision process operates in accordance with laws and regulations without illegal levies.

Obligation for Stipulation and Reporting by Governors

Governors must stipulate a Governor's Decree as the basis for providing incentives, as stipulated in Point 3 letters a and b. Governors are also required to submit a report on the implementation of the fiscal incentive provision to the Ministry of Home Affairs through the Directorate General of Regional Financial Development. For businesses, the Governor’s Decree in their respective regions serves as the basis for Samsat not to impose taxes on electric vehicles owned by the company.

Transitional Provisions

Governors must submit a report on the stipulation of the Governor’s Decree on tax exemptions no later than May 31, 2026, as stipulated in Point 3 letter b. Accordingly, electric vehicles are eligible to receive PKB and BBNKB exemption incentives in accordance with the policy options mandated in CL 900.1.13.1/3764/SJ under the legal framework of Permendagri 11/2026.

Closing

CL 900.1.13.1/3764/SJ requires governors to determine the appropriate policy option to provide fiscal incentives in the form of PKB and BBNKB exemptions for Battery Electric Motor Vehicles, including converted vehicles and those manufactured in or prior to 2026. In addition to fiscal incentives, regional governments are also required to provide non-fiscal incentives in accordance with applicable provisions and to prevent any abuse of authority in their implementation. Governors must stipulate a Governor’s Decree as the basis for implementing these incentives and submit a report to the Ministry of Home Affairs no later than May 31, 2026. For businesses, the issuance of a Governor’s Decree in their respective regions serves as the basis for the implementation of tax exemptions.