What Is Heavy Equipment Tax?

The Financial Relations between the Central Government and Local Governments Law officially took effect on 5 January 2022. The enactment of the Financial Relations between the Central Government and Local Governments Law also revokes Law No. 28/2009, the former legal basis for the collection of local taxes.

The Financial Relations between the Central Government and Local Governments Law is expected to be a breakthrough on various issues related to local taxes. One of the new provisions stipulated under the Financial Relations between the Central Government and Local Governments Law is heavy equipment tax. As such, what is heavy equipment tax?

Definition
Heavy equipment tax is the nomenclature of a new type of tax regulated under the Financial Relations between the Central Government and Local Governments Law. Referring to Article 1 number 31 of the Financial Relations between the Central Government and Local Governments Law, heavy equipment tax is a Tax on ownership and/or control of heavy equipment.The Financial Relations between the Central Government and Local Governments Law defines heavy equipment as:

“Equipment created to assist construction work and other civil engineering work which is heavy if operated by human power, operates using a motor with or without wheels, is not permanently attached and operates in certain areas, including but not limited to construction, plantation, forestry and mining areas.”

The Financial Relations between the Central Government and Local Governments Law introduces Heavy Equipment Tax as a new type of tax as the provincial authority. This tax targets the ownership and/or control of heavy equipment. However, not all machines are subject to Heavy Equipment Tax.

Further, the Heavy Equipment Tax rate is set at a maximum of 0.2%. The Heavy Equipment Tax rate is set by the provincial government through local regulations. The Heavy Equipment Tax base is the sales value of the heavy equipment, which is the general market average price of the heavy equipment concerned.

The general market average price is set based on the average price obtained from various accurate data sources in the first week of December in the previous tax year. The Heavy Equipment Tax base will be regulated by a minister of home affairs regulation after receiving considerations from the minister of finance.

Heavy Equipment Tax is payable since the taxpayer legally owns or controls the heavy equipment and may be paid in a lump sum in advance. Heavy Equipment Tax payable is collected in the area where the heavy equipment is controlled.

The regulation of Heavy Equipment Tax is also a follow-up to the mandate of the Constitutional Court Decision No.15/PUU-XV/2017 related to the assessment of the Local Taxes and Local Charges Law. The decision, among others, states that heavy equipment is not a motor vehicle that may be subject to motor vehicle tax.

The decision pertains to the provisions in the Local Taxes and Local Charges Law that include heavy equipment in the definition of motor vehicles that are also subject to Motor Vehicle Tax. However, the Financial Relations between the Central Government and Local Governments Law now introduces heavy equipment tax as a separate type of tax.