TKDN (Local Content Level)

TKDN (Tingkat Komponen Dalam Negeri, or Local Content Level) is the percentage of domestically produced components in a good or service, measured against the total components that make up the product. A higher TKDN means a larger share of the product comes from Indonesian materials, labor, and production processes. The government uses TKDN as a condition for granting certain facilities, including tax facilities. In the context of electric vehicle incentives, government-borne VAT (PPN DTP) is granted only to vehicles produced domestically with a minimum TKDN of 40 percent, so fully imported (CBU) cars do not qualify. TKDN is not a type of tax: it is a measure of local content that determines whether a product is eligible for an incentive.

This article is for education, not tax advice.

Example

An electric car is assembled in Indonesia with 45 percent of its components (battery, chassis, labor) sourced domestically. Because its TKDN is 45 percent and clears the 40 percent threshold, the car qualifies for the government-borne VAT facility. If its TKDN were only 30 percent, it would not be entitled to the same facility.

Source: PMK Number 12 of 2025; Minister of Industry Regulation on TKDN