Sales Tax on Luxury Goods (“Pajak Penjualan atas Barang Mewah” or PPnBM) is an objective tax, which means that imposition of PPnBM focuses on tax object, regardless tax subject condition. As the name implies, PPnBM is only imposed on luxury goods. Furthermore, PPnBM is only imposed once at the time Taxable Goods delivered by entrepreneurs who produce or when it is imported.

The VAT Law regulates several criteria for taxable goods that are classified as luxurious which are objects of PPnBM, namely:

1. Goods that are not staple goods;
2. Goods consumed by certain people;
3. Goods generally consumed by high-income people; and/or
4. Goods consumed to indicate status.

Furthermore, PPnBM rate is different from VAT rate. PPnBM rate is set at a minimum of 10% and a maximum of 200%. However, specifically for exports, PPnBM rate is 0%, same as the VAT rate on exports. The imposition of PPnBM rates is determined based on the grouping of luxury Taxable Goods stipulated in Government Regulations Number 73 of 2019 as amended with Government Regulations Number 74 of 2021 for PPnBM for luxury motorized vehicles and Government Regulations Number 61 of 2020 for PPnBM other than luxury motorized vehicles.

PPnBM Objects and Rates for Luxury Taxable Goods Other Than Motorized Vehicles

The grouping of PPnBM objects other than motorized vehicles is regulated in Government Regulations Number 61 of 2020 jo Minister of Finance Regulation Number 96/PMK.03/2021 as amended with Minister of Finance Regulation Number 15/PMK.03/2023. Objects are classified based on the community group ability as well as their use value for society in general.

Government divides Taxable Goods that are classified as luxury goods other than motorized vehicles into five rates, there are:

• 20% for luxury residential groups such as luxury homes, apartments, condominiums, totan houses, etc;
• 40% for groups of air balloons and steerable balloons, other non-propelled aircraft and groups of firearm bullets and other firearms;
• 50% for other aircraft groups and other firearms and other firearms groups; and
• 75% for the luxury cruise ship group consist of cruise ships, excursion boats and similar vessels primarily designed for persons transportation, ferries of all types as well as yachts.

Changes on goods classification system, imposition of import duty tariffs on imported goods in 2022, as well as PPnBM Exemption Certificates procedures adjustments make government changes the implementing regulations of PPnBM. In the annex to new regulation (Attachment I to Minister of Finance Regulation Number 15/PMK.03/2023) list of types of Taxable Goods classified as luxury other than motorized vehicles that are subject to PPnBM is as follows:

Several changes to list of types of Taxable Goods classified as luxury other than motorized vehicles in the new regulation are:

• Added HS No. ex 8806.10.000 for aircraft
• Added HS No. ex 9303.90.10 and ex 9303.90.90 for firearms
• Removed HS No. ex 9303.90.00 for firearms
• Added HS No ex 8903.21.00, 8903.22.00, 8903.23.00, 8903.31.00, 8903.32.00, 8903.33.00, 8903.93.00 for yachts
• Removed HS No ex 8903.91.00 and 8903.92.00 for yachts

PPnBM on Luxury Taxable Goods Other than Motorized Vehicles Exemption

Under certain conditions, some luxury goods are exempted from PPnBM imposition. Based on Article 3 Minister of Finance Regulation Number 96/PMK.03/2021 as amended with Minister of Finance Regulation Number 15/PMK.03/2023, the delivery or import of luxury Taxable Goods that are not subject to PPnBM are:

• Firearm bullets and/or other firearm bullets for national needs;
• Aircraft with propulsion for national needs or commercial air transportation;
• Firearms and/or other firearms for national needs;
• Cruise ships, excursion boats and/or such vessels especially designed for persons transportation, ferries of all kinds and/or yachts for the benefit of the state or public transport; and
• Yachts for tourism businesses

PPnBM exemption is given as long as Taxpayer has an exemption letter. However, luxury Taxable Goods (other than yachts for tourism) that have obtained exemption facilities or are not collected VAT will automatically be exempted from PPnBM imposition.

To obtain an exemption letter, taxpayers must submit an application to Director General of Taxes electronically through Directorate General of Taxes (DGT) website or submit an application through a page that is integrated with the DGT system. This application is made before filing an import customs notification or receiving delivery.

Associated with applying exemption letter procedure, new regulation in Minister of Finance Regulation Number 15/PMK.03/2023 is the obligation to include Taxable Goods code, as well as name and/or type of Taxable Goods. Furthermore, information regarding number and purchase contract date or sale and purchase agreement or document equivalent from now on must be included in exemption letter application, even though not for accepting the delivery of luxury goods.

PPnBM exemption letter, which applies to each import or delivery, will be issued by Head of Tax Office on behalf of Director General of Taxes no later than 5 (five) working days after receipt is issued. However, if taxpayer that submit an application does not fulfill the provisions of being free from tax debt as well as submits the last 2 (two) Annual Income Tax Returns and the last 3 (three) VAT Periodic Tax Returns, exemption application will not be processed.

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