Property Taxes in Indonesia - Easier Than You Think!
We recognise that understanding the Indonesian tax systems is challenging for you – including the aspects related to properties. However, it’s vital to have a good understanding of property law. Let’s discuss property taxes in Indonesia and you’ll know that it's easier than you think!
Understanding Property Taxes in Indonesia
Understanding property taxes in Indonesia is mandatory for everyone who are involved – including property owners, sellers, and buyers.
This property law isn’t applicable to Indonesians only, but also to foreigners. However, the regulations and tax rates are different between Indonesians and foreigners.
For instance, if you have a leasehold title for a property in Indonesia, you must pay the tax annually. These Indonesian tax systems can be complex. So, you need to be well-informed in order to prevent any potential punishments or penalties.
There are types of taxes applied in Indonesia that you should know. What are they?
Land and Building Tax (PBB)
Land and building tax is an annual-basis property tax paid by everyone who owns property in Indonesia. This tax is named Pajak Bumi dan Bangunan (PBB) in Indonesian.
Land and building tax is the most fundamental tax among property taxes in Indonesia and is collected by the local government.
If you have a leasehold title for property in Indonesia, you’ll be charged by the landlord for this tax.
There are three factors that influence the land and building tax – PBB rate, NJOP, and NJKP.
What are the meanings of those terms? Let’s dive!
1. PBB Rate
This is a rate that refers to Undang-undang Hubungan Keuangan antara Pemerintah Pusat dan Daerah (UU HKPD). The maximum PBB rate is 0.5%.
Take note that 0.5% is a maximum rate. It means the PBB rate can different depending on the area. Every local government sets the PBB rate based on the local regulation that applies.
2. NJOP (Nilai Jual Objek Pajak)
An average market value obtained from the previous real estate transaction. NJOP is set by the local government if there’s no real estate transaction recently.
NJOP value is influenced by several factors – location, population density, transportation facilities, and type of property. It means NJOP values are different depending on the area where your property is located.
The good news is, you can check the NJOP value in your property’s area – online and easily. For example, you can check for Bali area on the BAPENDA Bali Official Website or for Badung Regency area on the BAPENDA Badung Official Website.
3. NJKP (Nilai Jual Kena Pajak)
NJKP is a value based on NJOP. The formula is:
If you’ve found the NJOP and then the NJKP value, now you can calculate the PBB. The formula is:
For easier understanding, let’s say you have a property with the NJOP value of Rp3,000,000,000 (3 billions rupiah) in Badung Regency. How much you must pay PBB tax annually?
The following are NJOP rates that apply in Badung Regency:
● NJOP rate if the property value is 1 billion rupiah or below in Badung Regency = 0.1%
● NJOP rate if the property value is more than 1 billion rupiah in Badung Regency = 0.2%
So, you must pay Rp2,390,400 annually for the PBB tax.
Please take note that PBB is an official assessment. It means the local government has the authority to assess your PBB tax tariff. You need to pay the tax annually.
Land and Building Transfer Taxes
Property buyers and sellers must pay specific property taxes in Indonesia. There are Sales Tax (PPh), Transfer Tax (BPHTB), and Value Added Tax (VAT).
1. Sales Tax (PPh) – paid by the seller
Sales Tax or Pajak Penghasilan (PPh) is a tax that is paid by a seller when selling a freehold property. How to calculate the PPh?
The rate of PPh is 2.5% of the property value that is written in the Sales Deed or Akta Jual Beli.
2. Transfer Tax (BPHTB) - paid by the buyer
Someone who buys property or land in Indonesia must pay a tax called Transfer Tax or Bea Pengalihan Hak atas Tanah dan Bangunan (BPHTB) in Indonesian.
The rate of BPHTB is 5% of Nilai Perolehan Objek Pajak (NPOP) reduced by Nilai Perolehan Objek Pajak Tidak Kena Pajak (NPOPTKP).
Based on that explanation, the formula of BPHTB is:
3. Value Added Tax (VAT) - paid by the buyer
Value Added Tax is a tax paid when you buy or lease a property from a professional developer. This tax is also called Pajak Pertambahan Nilai (PPN). The rate of VAT is 11% of the property value.
Other Property Taxes in Indonesia
Besides PBB or Land and Building Transfer Taxes, there are other kinds of Indonesian tax systems we can explore.
Especially, if you have a leasehold title and run a rental property business in Indonesia. This part is quite interesting and important for you.
1. Rental Income Tax
Rental income tax is calculated from the gross income you earned from your rental business. This tax is also called Lease Tax.
So, how much do you pay for rental income tax?
Well, it depends on your residency in Indonesia. You just need to pay 10% of your rental income If you're subject to the resident tax of Indonesia. But, you must pay double (20%) if you’re a non-resident of Indonesia.
This means, knowing your rental income tax is crucial for considering your rental rates.
2. Construction Tax
When individuals decide to develop a building on their land, they’re also obligated to pay a tax known as Construction Tax.
Construction tax tariff is influenced by two factors – tax rates and construction’s budget. The tax rates vary on the business qualification of the constructor.
In order to make you understand about construction tax easier, here are the tax rates based on PP Nomor 9 Tahun 2022 (Government Regulation) approved by the President of Indonesia:
Here is the formula of construction tax:
3. Luxury Tax
Luxury Tax, or known as Pajak Penjualan atas Barang Mewah (PPnBM), is a tax which applies to a property with at least 30 billions rupiah. This tax rate is 20% of the property value.
Obeying the property law and taxes is crucial for you who has property in Indonesia. By knowing how property taxes in Indonesia work, it will help you to prevent unpleasant consequences.
Understanding property taxes in Indonesia isn’t as hard as it looks. More than preventing you from penalty, you also can set the best tax optimization strategy easier for your property business in Indonesia.