Indonesian Property Taxation - Sunrise Property Bali

March 20, 2014 - PRLog -- Land and Constructions are calculated at a value calculated by the Regional government, called NJOP – which is usually below real market value. This NJOP has the caveat of being a legally non-negotiable purchase price if the Government wishes to procure said land.

As mentioned in the Indonesian Property Law (http://www.sunrisepropertybali.com/test/indonesian-property-laws/) section, Non-Indonesian citizens are legally not allowed to own land but may arrange long-term assured leases. As such, Foreign Nationals may not be subject to certain Land Tax obligation of Indonesians. Exemptions from Land Tax also exist for ‘poorer’ individuals. Land Tax calculations are considered a highly specialised skill – most especially as the punishments and sanctions for false reportage can be very severe and costly.

Below is an overview of the most important taxation terms and guidelines; keep in mind that this is just a short introduction.

Be advised that the information below is limited, subject to change and that there are possible exceptions on the information supplied which are beyond the scope of this introduction. Most exceptions are related to government related entities or have to do with specific areas in Indonesia; mainly Batam and Jakarta.

Taxation On Acquisition

* Criteria Of Luxury Properties:

Landed houses with a building area of above 400 sqm
Apartments or condominiums with a net area of above 150 sqm

Taxation On Selling

Holding Land and Building Tax – Explained
Land and building tax or PBB (Pajak Bumi dan Bangunan) is a type of property tax chargeable on all land and/or buildings, unless exempted. PBB rate is specified at 0.5% of the taxable sale value or NJKP (Nilai Jual Kena Pajak) of the property.

NJKP is a predetermined proportion of the sale value of the tax object or NJOP (Nilai Jual Objek Pajak) of a particular land and building. NJKP is currently stipulated to be either 20% of NJOP (for NJOP up to Rp. 1 billion) or 40% of NJOP (for NJOP above Rp. 1 billion). As a result, the effective PBB at present is either 0.1% (for land and building worth up to IDR 1 billion) or 0.2% (for land and building worth over IDR 1 billion) of the NJOP. The NJKP is determined by the Directorate General of Tax (DGT) on behalf of the Ministry of Finance on average every one to three years.

Example

You have a Luas Tanah (land size) of 1.000 m² and a Luas Bangunan (building size) of 320 m² and the NJOP per m² is respectively IDR 254.000 for the land and IDR 184.000 for the construction:

1.000 x 254.000 = 254.000.000
 320 x 184.000 = 58.880.000
 Meaning a NJOP total of 312.880.000

The tax basis will be taken on 20% of the above amount and is called the NJKP. In this example, the NJKP will be then IDR 62.576.000.

The amount of tax to be paid (PBB) is equal to 0,5% of the NJKP, meaning in this example that the yearly PBB of the land and construction is IDR 312.880. This amount will vary from year to year depending on the increase of the NJOP.

PBB is payable annually following an official assessment issued by the DGT. The assessment process is typically initiated by the DGT submitting a Tax Object Notification Form (Surat Pemberitahuan Objek Pajak/SPOP) to the taxpayer in question.

The form must be filled out by the taxpayer and returned to the DGT within 30 days. Using the completed SPOP and taking into account the NJOP-related information, the DGT issues a Tax Due Notification Letter (Surat Pemberitahuan Pajak Terutang/SPPT), presenting the official tax assessment made by the DGT. The taxpayer in question is required to pay the tax due within six months of receipt of the SPPT. Incorrectly filling in a SPOP, late filing of the completed SPOP, or ignoring the SPOP can expose a taxpayer to a potential penalty of 25% of the PBB due.

An individual or an organisation that owns a right to a piece of land, and/or takes benefits there from, and/or owns, controls, and/or takes benefits from a building can by law be regarded as the PBB taxpayer for that piece of land and/or building. Each taxpayer is entitled to a non-taxable NJOP. The non-taxable thresholds of property are stipulated by each regional government. For example, in Jakarta, it is IDR 60 million.

Withholding Tax on Property Income

Income derived from rental payments and service charges are subject to a final tax of 10% of the transaction value. The party from which the payment is due is responsible for the deduction and payment of the withholding tax to the tax authorities. If not, the lessor must pay the 10% itself.

Tax On Acquisition And Transfer Of Land And Building – Explained
Duty and legal costs

Individuals or companies obtaining rights to land or buildings
are required to pay a Land and Building Transfer Duty or BPHTB (Bea Pengalihan Hak atas Tanah dan Bangunan) of 5%. The 5% duty is computed based on the transaction value or the assessed value (NJOP), whichever is higher.

The non-taxable threshold amount for BPHTB varies by region, and the maximum threshold currently is IDR 60 million. For acquisitions by inheritance, the non-taxable property value is stipulated by the regional authorities, but may not exceed IDR 300 million.

Notary fees for the processing of legal documents are usually charged at about 0.5% to 1.5% of the transacted price. A notary is prohibited from signing a transfer of rights deed until the income tax has been fully paid.

Capital Gains Tax

Land and Building Transfers
A 5% tax on sales value is levied on companies and individuals for the sale/transfer of land rights and/or buildings. For transfers of simple houses and apartments by taxpayers engaged in property development business, the tax rate is 1%.
The 5% tax on sales value is final.
The transfer tax deposit slip (Surat Setoran Pajak) must be presented to the National Land Agency office together with the request for land title transfer.

Asset Revaluations
The net gains from asset revaluations (approved by the tax authority) are subject to a 10% final tax.An additional final income tax of 15% is imposed if the revalued assets are sold or transferred within five years of revaluation. This additional tax does not apply to assets transferred to the government or transferred in the course of a tax-free business merger. (However, such mergers must be for business purposes and not tax driven.)

Shares

Foreign companies and individuals are subject to a 20% withholding tax on dividends from property companies (subject to tax treaty provisions, where relevant). A final tax of 0.1% applies to income from the sale of shares at the Indonesian Stock Exchange (collected ‘automatically’ by the Stock Exchange). The rate is 0.6% if the seller is a founding shareholder.
A 5% tax is applicable to the sale of shares by a foreign shareholder, unless it is exempted under a tax treaty.

The Information provided above is subject to change and thus may not be fully up to date at any time. Sunrise Property actively advises you to seek independent professional legal counseling from reputable lawyers and notaries