Property taxes in Indonesia

Rental taxes

PPN (VAT)

PPN is added at 10% on rental income, but only if the owner of the property earns more than 4.8 billion rupiah per year. Therefore it is not possible to state whether a rental will incur PPN or not, it depends on the owner’s status.

PPN is charged on all kinds of accommodation income except for hotels.

Hotel tax

Hotel tax is charged on hotel rooms. The major difference is that hotel tax is payable to local government instead of national government. Local government tends to be less generous about allowing this tax to be avoided. Essentially PPN is charged on services, but to allow local governments to earn tax revenue, hotel rooms, restaurants, and some other things are made exempt to allow the local tax to be charged instead.

PPh (income tax) on land/building rental income

According to PP 34/2017 and PMK 261/2016, rental income from land, or building (part or whole) is subject to 10% final income tax. Final means that it must be paid in all cases, with no deductions allowed. This is not applicable to accommodation services.

The rules for the payment of this tax are:

• if the tenant is a company, then the tenant must withhold 10% of the rent and pay it to the government by the 10th of the next month, and provide proof of that payment to the owner
• if the tenant is an individual, then the owner pays the tax himself, by the 15th of the next month. He does not need to provide evidence of this to the tenant.

Since PPh is a deduction from income, as against PPN, which is added to income, it follows that if it is not mentioned in the contract then the tenant does not owe it. However unscrupulous or unknowing owners, may try to scam a tenant by asking them to pay income tax, even though this is not their responsibility.

Where PPN is also due, for example on a 100 million rental, the tenant would pay 110 million rupiah and the landlord would receive 90 million.

If the rental agreement specifies that the rental price is net of PPh, and subject to PPN, then this would mean the tenant should add 1/9 for the PPh, and 1/10 for the PPN, e.g., 100 million becomes 121.111 million.

PPh on accommodation services

Accommodation services includes, among others, ‘rooms, dormitories for students, dormitories or workers lodgings, and boarding houses’. The word used is ‘rumah kost’. So for example a purpose built boarding house is obviously a ‘rumah kost’.

It is not completely clear when something becomes a business. For example, if you took in one lodger into your home. In addition, building rental PPh is due on ‘part of a building’, but not where it is an ‘accommodation service’. So if you rented out your garage for someone to run a business, that would be building rental PPh.

As a business activity, essentially accommodation services are subject to ‘normal’ income tax. In general income tax has a 54 million per year annual exemption, which can be pooled for married couples, with an addition of 4.5 million for dependents. Above that, income tax is 5%, 15%, 25%, or 30% depending on income.

For limited companies the income tax rate is 25%.

PP 23/2018 grants business activity income tax the dispensation of 0.5% income tax, provided that the business activity does not exceed 4.8 billion rupiah. This dispensation expires in 2021 for PT, and 2025 for private tax payers.

Land ownership tax / PBB (pajak bumi dan bangunan)

Unfortunately for the purposes of clarity of understanding, PBB, the annual land ownership tax, is a local tax, albeit based on national principles. (Note, there is in fact a national version of PBB, called PBB-P3, as distinct from PBB-P2, which is calculated differently and applies only to plantations, mines, forestry, etc.)

The basics are laid out in UU 28/2009, article 77–84, and in Finance Ministry Regulation PMK 208/2018.

Under that law any kind of structure or land can be the subject of PBB, except for graveyards, and for not-for-profit functions including education, religion, health, social. The tax is payable by the user of the land, or the owner. Land that lacks a land certificate will not be subjected to PBB. Most land is not certificated, but in theory all land should be, and foreigners will typically welcome the certainty provided by a land certificate, since without one their legal rights are not strong, whereas Indonesians are in a stronger position by default.

Tax rates vary locally but cannot exceed 0.3% by law. Rates typically range between 0.1% and 0.3% depending on area. Some areas have a sliding scale depending on value, so that cheaper property attracts a low rate, while the most valuable properties attract a larger tax.

NJOP (land value)

The NJOP (Nilai Jual Obyek Pajak — tax object sale value) does not represent the price at which a land or building was purchased. It is the theoretical value of the land and the buildings on it, based on the building area/type and the area of the land underneath it.

The Nilai Jual Obyek Tidak Kena Pajak (NJOTKP)is defined locally, and is typically 10 million rupiah (the legal minimum). This is the tax-free amount, which is is deducted from land value, based on NPWP (tax ID). If no NPWP is provided, then there is no NJOTKP, however since the NJOTKP is typically very small, this doesn’t really make significant difference.

The ZNT (zona nilai tanah/land value zone) represents a map of land values set at a local level. For example, a given kecamatan might have 50 different zones defined. This gives a Nilai Indikasi Rata-Rata (NIR), an average indicative value. This NIR per square metre is multiplied by the area in square metres to give the land tax. The NIR is based on average selling prices with construction costs removed.

There is a separate tax evaluation of the building, which is based on the area of the building, its function and construction cost. For larger land/buildings, more specific evaluations will be performed.

In some areas, where land is very expensive and there are many transactions with foreigners (e.g. much of Bali), property tax land values can be higher than current selling prices. In other areas, with few foreigners, declared buying/selling prices are often far lower than actual prices, and local government may fail to update land values to represent the real market value. This can lead to large disparities between NJOP depending on the local government where you own land.

For example, in one part of Indonesia a 1400 square metre portion of land that was purchased for 100 million rupiah, which suggests a land value of 70,000rp/square metre, had an NJOP of just 2,450rp/square metre. Obviously the NJOP in that case bears no resemblance to recent selling prices. In theory local governments should update the NJOP rates in accordance with a survey of actual land values every three years. In practice this is patchy, and may vary substantially from area to area, however it is worth bearing in mind that a very low NJOP could be updated at the next triennial evaluation, to reflect the real land value, resulting in a substantial land tax increase.

Tax on transactions related to the buying and selling of land rights

Bea Perolehan Hak Atas Tanah dan Bangunan (Land Rights acquisition duty)

BPHTB is a tax, typically 5%, payable any time certain land rights are created or changes hands (through gift, inheritance, sale, etc). It does not apply for extensions or renewals of rights, but it does apply for re-issue (i.e. after 80 years in the case of hak pakai). Originally BPHTB was a central government tax. However a 2009 law, 28/2009, devolved it regionally.

The rights subject to BPHTB are:

• hak milik
• hak milik atas satuan rumah susun
• hak guna usaha
• hak guna bangunan
• hak pakai
• hak pengelolan

Hak sewa and hak tanggungan are therefore not subject to BPHTB.

The basis for BPHTB is the selling price for purchases, and the market value for other transactions (such as issue of new rights, inheritance, etc.). However, if the value based on NJOP (see PBB above) is higher, then that value will be used instead. This does not apply to auctions, when the hammer price is always used.

In areas where the NJOP set by the government accurately reflects market values, there is therefore little reason for buyers to commit BPHTB fraud by recording a lower than actual price on the purchase document, since they will be charged based on NJOP anyway. However, as in cases discussed under the PBB section, where the NJOP is far lower than reality, tax avoidance is common. For example, where the (horribly outdated) NJOP results in a value of 10 million rupiah and the actual selling price was 300 million, then it is not uncommon to record a (fraudulent!) selling price of 100 million, reducing the BPHTB.

There is a tax-exempt amount or NPOPTKP (Nilai Perolehan Obyek Pajak Tidak Kena Pajak) of at least 60 million, or 300 million for direct inheritance to spouse or children. The BPHTB is no more than 5%, and that is usually the actual standard figure.

In order to find the actual NPOPTKP and BPHTB, it is necessary to review ‘Peraturan Daerah’ for the area of sale. This is at the level of Kota/Kabupaten. For example ‘Peraturan Daerah Badung’, Bali are, 14/2010, 28/2013, 72/2014, 36/2017 and 70/2018, and provide:

• standard 60 million NPOPTKP
• 5% BPHTB
• except for inheritance to spouse or children, when it is 0%.
• no tax on rights conversions for the same name (e.g., from hak pakai to hak milik)
• discounts of up to 25%, 50% (e.g. for corporate owners who have already managed land for 20+ years), 75% or 100% on taxes in certain cases, such as very simple houses, corporate mergers, etc.

These are regional regulations. In most cases the 5% tax rate and 60 & 300 million tax-free amounts applies, as well as the tax-exemption for rights conversion in the same name. The 0% tax for inheritance is not so common, however.

As an example, if you buy a house for 1 billion rupiah, then you must first check the SPPT (land tax certificate). If the SPPT shows that the NJOP is higher than 1 billion then you will be taxed on that value instead. Normally, it is lower, and you can expect to pay tax of (1000–60) * 5% = 47 million rupiah, depending on the specific rate & NPOPTKP for the area.

Value added tax (PPN) on sales

PPN (VAT) is charged on new property development, so long as the developer meets the PPN threshold, which is gross sales of 4.8 billion rupiah. The rate is 10% of the selling price.

There is (March-August 2021) a 100% discount from VAT for new homes up to 2 billion rupiah, and 50% up to 5 billion rupiah. Previously the regulations were set every two years and provide a 100% discount for simple homes only (defined as those no larger than 36 square metres on no more than 60 square metres of land). The exempt value for 2020 was between 150 and 170 million depending on area, except in Papua where it was 219 million. The rate should be expected to rise every year.

Normally PPN will be included in advertised prices for new homes

Self-build PPN

Self-build can be subject to PPN. PPN is charged based on 20% of the cost of construction (materials and labour, not land), at the standard rate of 10%; i.e. 2% of everything you spend.

Self-build PPN is payable only when the total building(s) area exceeds 200 square metres. Only permanent buildings of wood, brick, steel, brick, concrete, etc. are counted. This applies both to private residences and business premises. See PMK 163/2012.

Luxury sales tax (PPnBM)

Luxury sales tax, or PPnBM is NOT VAT. It is luxury sales tax. As this tax is fairly punishing, it is frequently updated. The current regulation is 35/PMK.010/2017, as updated by 86/PMK.010/2019. This makes only houses, apartments, etc. costing over 30 billion subject to PPnBM, which is set at 20%. Previous versions of the law applied based on land area. The luxury sales tax is charged only once, on new properties, based on UU 8/1983, article 5.

Article 22 Income tax (PPh) on luxury sales

Article 22 income tax applies to a number of different forms of income, but in the context of property it is a surtax charged by the seller of a luxury property to the buyer, on top of the sales price (thus, though it is listed as in income tax, it is in effect a sales tax).

The current rate set by PMK 03/2019 is 1% and applies to pre-PPN/PPnBM income earned from sales of land/property with a selling price over 30 billion rupiah, OR a house over 400 square metres OR an apartment over 150 square metres.

Income tax (PPh) on sales

Income tax (PPh) in general is to be paid by the person who sells/gives/transfers land rights to another party. The legal basis is PP 34/2016, and is a central government tax, therefore the same nationally. The tax basis is the actual selling price of the land, or the market value if the selling price is not clear, or if money did not change hands. This is not the NJOP, which applies to PBB/BPHTB — here a real market valuation should be performed if necessary.

The tax rate is a flat 2.5% with no deductions. There is a special rate of 1% which is applicable only to businesses in the business of selling modest (‘sederhana’) homes.

Exempt from this PPh are:

• individuals who earn less than the income tax threshold (at least 54 million per year but potentially double for married couples), provided the sale value is not more than 60 million, and is not a series of transactions below 60 million rupiah.
• gifts of land to parents or children, educational, religious, social bodies,
• all forms of inheritance

Government land fees

Various fees are levied in PP 128/2015. These are mapping/survey fees, on top of which incidental expenses (transport, accommodation, etc., can also be charged). 50% discounts are given to civil servants, army, etc., and the poor / owners of simple houses may be given a 100% discount.

Land measurement & measurement fees (HSBK) are firstly HSBKu (pengukuruan / measurement), which is a measurement fee, set regionally between 25,000rp and 104,000rp (half price for agricultural land), charged per 500 square metres, plus 100,000rp, for any land up to 10 hectares in size.

Secondly, there is an inspection fee (HSBKpa, HSBKpp or HSBKpm), which is 20,000rp/10,000rp per 500 square metres, plus 350,000rp.

Fees are charged for redistributing abandoned land:

• to individuals — free under agrarian reform
• education/health foundations — 25% of the NJOP
• to companies — 100% of the NJOP

The fees set for extending or renewing HGB, HGU, and Hak Pakai are defined as 0.2% of the NJOP, plus 100,000rp.

The fees for land certificates are:

• registration of a new hak tanggungan (land charge) — 50,000rp up to 250 million, 200,000rp up to 1 billion, 2.5 million up to 10 billion, 25 million up to 1 trillion, 50 million over 1 trillion
• sale/transfer of any kind of hak — 50,000rp
• conversions of land from one status to another (HGB to Hak Milik, for example) — 50,000rp