Luxury Goods Tax (Pajak Penjualan atas Barang Mewah or PPnBM) is a tax imposed on high-value, non-essential goods in Indonesia. Applied at the production or import stage, PPnBM serves multiple purposes, including regulating luxury consumption, ensuring tax fairness, and generating government revenue.
Understanding how this tax works is crucial for businesses and consumers dealing with luxury products in Indonesia.
Key Takeaways
- PPnBM applies only once – either at production or import.
- Tax rates range from 10% to 200%, depending on the product.
- Luxury vehicles, premium properties, and high-end goods are the primary targets.
- Recent changes (PMK 131/2024) set the VAT for luxury goods at 12% starting 2025.
- PPnBM supports economic fairness while generating government revenue.
Also read: Indonesia’s PPN Guide: 2025 Regulation, Rates, Calculation
What is Luxury Goods Tax (PPnBM)?
Luxury Goods Tax, or Pajak Penjualan atas Barang Mewah (PPnBM), is a tax imposed on goods categorized as luxury items. This tax applies only once, either at the point of production or import, and is intended to regulate consumption, promote economic fairness, and generate government revenue.
PPnBM is primarily governed by Law Number 7 of 2021, PP 73/2019 jo. PP 74/2021, and PP 61/2020, with further clarifications under PMK 131/2024.
Why Does Indonesia Have a Luxury Goods Tax?
The government imposes PPnBM for several reasons:
- Tax fairness – Ensures a fair tax burden between high-income and low-income consumers.
- Consumption control – Discourages excessive consumption of non-essential, high-value goods.
- Support for local industries – Protects small and traditional producers from competition with luxury goods.
- Revenue generation – Contributes to national income while balancing economic growth.
What Qualifies as a Luxury Good?
According to VAT Law Article 5, luxury goods are classified based on:
- Non-essential nature – Not a primary necessity.
- Selective consumption – Typically used by high-income groups.
- Status symbol – Indicates social status or exclusivity.
Examples of Goods Subject to PPnBM
PPnBM applies to various luxury goods, including:
- Luxury vehicles – High-end cars, motorcycles, and private jets.
- Premium properties – Luxury houses, apartments, and condominiums.
- Luxury transportation – Private yachts, cruise ships, and helicopters.
- Exclusive goods – High-end watches, jewelry, and designer fashion.
Also read: Indonesia’s Sales Tax: A Guide for Businesses and Investors
PPnBM vs. VAT: What’s the Difference?
Indonesia imposes both Value-Added Tax (VAT) and PPnBM. The key differences include:
- VAT applies broadly to most goods and services at a standard rate of 11% (12% starting January 1, 2025).
- PPnBM applies only to luxury goods at rates ranging from 10% to 200%, depending on the product category.
Recent Updates: VAT Increase on Luxury Goods
Under PMK 131/2024, the government clarified that while the general VAT rate remains 11%, the effective VAT for luxury goods will be 12% from January 1, 2025. This policy aligns with President Prabowo Subianto’s economic plan to ensure tax fairness.
How Much is the PPnBM Tax Rate?
PPnBM rates vary based on the type of goods. The tax can be as low as 10% and as high as 200%. The exact rate depends on factors like import status, exclusivity, and economic impact.
Also read: Indonesia’s Import Tax Regulation: A Complete Guide
PPnBM Exemptions
Certain goods are exempt from PPnBM, such as:
- Public transportation (buses, ambulances, and fire trucks)
- Military and government vehicles
- Essential housing
Additionally, exported luxury goods are subject to a 0% PPnBM rate, and taxes paid on exported luxury goods can be refunded.
Economic and Social Impact of PPnBM
Effects on Consumer Spending and Economic Growth
PPnBM influences consumer behavior, making luxury goods more expensive and less accessible to the general population. This tax also supports local industries by making imported luxury products more costly compared to domestically produced alternatives.
Addressing Economic Inequality
As part of Indonesia’s progressive taxation system, PPnBM ensures that high-income consumers contribute more, reducing economic inequality. This aligns with the government’s broader economic control measures.
Also read: Progressive Tax in Indonesia: Complete Guide for Expats
Understanding PPnBM is essential for businesses, investors, and consumers navigating Indonesia’s tax landscape. As regulations evolve, staying updated on Ministry of Finance (Kementerian Keuangan) policies is crucial for compliance.
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sources:
- Ministry of Finance Indonesia
- Cabinet Secretariat of the Republic of Indonesia
- The Directorate General of Taxes Indonesia
