Indonesia is a sought-after destination for business owners and investors to purchase or own a property. Thanks to its recent economic reform, Indonesia does not just depend on direct taxes for the country’s income. Therefore, expats buying properties in Indonesia are paying one of the lowest property taxes on their property acquisitions, compared to many Southeast Asian countries.
The land and building tax or Pajak Bumi dan Bangunan (PBB) is a state tax and the most basic property tax in Indonesia. Individuals or entities who pay for the PBB have the right to the land in terms of land control, land ownership, etc. PBB is levied at 0.5% and it is a regional income for the local government and central government for their facilities provision.
Taxes Imposed During the Transfer of Land and Building Rights in Indonesia
During the transfer of land and building rights in Indonesia, both buyers and sellers shall pay certain taxes. Sellers must pay for the income tax of the sale of land or property, and buyers need to pay for the acquisition tax of land and building rights.
1. Income Tax (PPH) Payable by Sellers
Sellers must pay for the income tax from the transfer of their land or building rights per the Indonesian Law GR 34/2016:
- 1% for simple flats or simple houses for their transfer of land or building rights
- 2.5% for regular buildings except for simple houses or simple flats for their transfer of land or building rights
- 0% for government’s buildings and government’s special-assignment building for their transfer of land or building rights
2. Acquisition Tax (BPHTB) Payable by Buyers
Acquisition duty is imposed on buyers for their acquisition of land or building rights. The rate is 5% and is determined based on the assessed value or transaction value.
However, certain individuals or organisations are not subject to BPHTB. These acquisition tax-exempted individuals or organisations are stated below:
- The State for the administration of government or development implementation for public interest
- Diplomatic consulates or representatives in terms of reciprocal treatment
- Representatives of agencies of international organisations not undertaking any profit-generating activities
There are some other taxes related to property in Indonesia that you must be aware of. Speak with a tax professional to understand more about these additional taxes.
1. Lease Tax
Lease tax or rental income tax is also applicable for both tax residents and non-tax residents in Indonesia. For tax residents, the amount of lease tax is 10% of the property lease value; for non-tax residents, the lease tax is 20% of the property lease value.
2. Construction Tax
Construction tax in Indonesia is only applicable when the construction of the building is done. The construction tax value is calculated based on the building’s construction budget or Rancangan Anggaran Biaya in the Indonesian language. The construction tax rate is 2% or 20% of the most current value-added tax rate.
How Cekindo can Assist
Legal consultants at Cekindo are skilled tax lawyers and professionals who can offer you the best property tax advice on the most complex matters. Our team also consists of experienced and high-ranking business specialists with unique insight to help you deal with tax audits, debts, and disputes.
Your property tax in Indonesia should not be overwhelming. Whether you are an investor, owner, or developer, Cekindo is here to deliver custom-designed solutions to help you eliminate property tax complications, add value, and achieve your desired outcome.
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