The Indonesian government imposes taxation obligations on local and foreign investors and it is therefore essential to obtain qualified legal advice from a lawyer or legal advisor. We will help you understand the taxes and fees involved by both the property seller and buyer, which depend on the land titles and ownership type.
We do not intend to replace such legal advice, but merely provide a brief explanation of some of the taxes that you may likely be responsible for upon taking an interest in property in Indonesia. These tax liabilities can include Income Tax (PPH), Value Added Tax (Pajak Pertambahan Nilai or “PPN”), Stamp Duty and Levies, and Land and Building Tax. Here is a brief summary of some of the tax liabilities when purchasing property in Indonesia:
For Freehold Property (Hak Milik)
1) Land & Building Transfer Tax
The seller pays the Income Tax PPh on property sale transfer tax (Pengalihan Hak atas Tanah dan Bangunan). The tax is 2.5% of NJOP (government land value) or sale price, whichever is higher usually.
The buyer pays the land and building acquisition duty (Bea Perolehan Hak atas Tanah dan Bangunan – BPHTB), set at 5% of NJOP (government land value) or sale price.
2) Land & Building Tax (PBB)
The general rate of the yearly Land & Building Tax is 0.5% of the assessed value of the land and/or land and its buildings. Values are reassessed every year. Luxurious residential properties may incur additional taxes, while exemptions may be granted for land and buildings used for religious, social, educational and other public purposes. For most properties, the current year’s tax amount has already been determined and is available for review before moving forward with the purchase process.
3) Notary Fees
The cost of each notary may vary and is generally 1% of the property sale price. It can be higher though, depending on the complexity of the acquisition and requested services. The buyer usually pays the notary fees, as they are the one to select their preferred notary. Sometimes both parties, depending on the agreement, may share the cost of notary fees.
For Leasehold Property
1) Income Tax – PPh
Formal lease documents are prepared and notarized. They are not, however, registered with the Indonesian Land Office as an encumbrance on the Hak Milik (Freehold) title. It is a private agreement between two individuals, Lessor and Lessee, and there are strict laws protecting the interests of the lessee of a property (land & building). The income of the land & building lease are subject to a final income tax (PPh) of 10% of the rental value of the property and is paid by the Lessor.
2) Notary fees
Same as above for freehold titles, the cost of each notary may vary and is generally 1% of the property sale price. It can be higher though, depending on the complexity of the acquisition and requested services. The buyer usually pays the notary fees, as they are the one to select their preferred notary. Sometimes both parties, depending on the agreement, may share the payment of notary fees.