Tax And Costs Incurred by The Property Seller and Buyer in Bali
Buying and selling a property is an activity that involves costs, especially tax. There are several types of taxes and fees incurred by the property seller and buyer.
The Indonesian government, like any other government, imposes taxation obligations on foreign investors and it is therefore essential to obtain qualified legal advice from a lawyer/legal advisor. Here, we do not intend to replace such advice but merely give a brief summary of some of the taxes that you may likely be liable for upon taking an interest in property in Indonesia, such as Income Tax (PPH), Value Added Tax (Pajak Pertambahan Nilai or "PPN"), Stamp Duty and Levies and Land and Building Tax.
This article will help you to know the taxes and fees that must be paid by the property seller and buyer, so you can go through the process of buying and selling property smoothly.
Following is a brief summary of the typical costs involved in transfers of land titles in Indonesia.
- Land & Building Transfer Tax
In order to stimulate real estate development, the government has cut the property sale transfer tax effective as of 08 Sept 2016, via Peraturan Pemerintah Republik Indonesia Nomor 34 Tahun 2016.
Previously the tax obligation due to the seller of the property was 5% of NJOP or sale value, whichever is higher, now it has been halved to 2.5% (1% for houses that qualify as Rusun/Rumah Sederhana).
In a property transaction between private parties, the following taxes then apply:
The seller pays the PPh Final on Pengalihan Hak atas Tanah dan Bangunan, or property sale transfer tax. The tax has now been lowered to 2.5% of NJOP (gov’t assessment) or actual sale price, whichever is higher.
The buyer pays the Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB), or land and building acquisition duty, currently set at 5% x (the higher of NJOP or sale price – NPTKP).
Land and building acquisition duty (BPHTB)
According to Article 5 of Law No.21/1997, the tax rate of BPHTB is calculated at 5% (five percent) of the Acquisition Value of the Taxable Object (“NPOPKP”). Individuals or companies obtaining rights to land or buildings are required to pay a Land and Building Transfer Duty (BPHTB) of 5%. The 5% duty is calculated based on the transaction value or the assessed value, whichever is higher.
- Land & Building Tax (PBB)
The general rate of the annual Land & Building Tax is 0.5% of the assessed value of the land and/or land and its buildings. Values are reassessed every three years (or every year in rapidly developing areas). Luxurious residential properties valued in excess of IDR 1 billion are taxed at a rate of 0.2%, while exemptions are granted for buildings valued under IDR 8 million and land and buildings used for religious, social, educational and other public uses.
- Luxury Goods Sales Tax
Sales of luxury houses, apartments, townhouses, and condominium units are subject to 20% sales tax. The Luxury Goods Sales a Tax is based on luxury houses and townhouses which have a selling price of IDR 20 billion (US$1,483,760) and above and luxury apartments and condominium units which have a selling price of IDR 10 billion (US$741,880) and above.
- Notary Fees
The cost of each notary may vary and is generally between 1% – 2.5%, typically depending on the complexity of the acquisition and the scope of services requested. As the buyer chooses the notary then the notary fees are usually paid for by the buyer and the buyer must negotiate the fees with the notary.
But sometimes the payment of notary fees are not only by the buyer, but may be paid by both parties, ie sellers and buyers, depending on the agreement or where 2 notaries are working in collaboration.
Leases in Indonesia, whilst often formal documents are prepared by a Notary, are not registered with the Indonesian Land Office as an encumbrance on the Hak Milik (Freehold) title and are thus considered a private agreement between two individuals. There are however strict laws protecting the interests of a lessee of land.
The income of the land and building lease shall be subject to a final income tax of 10% (ten percent) of the gross amount of the rental value of the land and/or building.
Taxes and fees related with Leasehold transactions
|Income Tax (PPh): 10%||Notary Fees: 1% – 2.5%|
|Agent’s Commission: 5.5% (5% + 10% PPN)|
When property is sold, there is tax to be paid by both the selling and the buying party. The value that will need to be paid by the buyer is 5% and the tax to be paid by the seller is 2.5% of the amount that is stated on the sales contract. Please note that the amount listed on the sales contract is often different from the actual agreed sale price. The tax is paid through the notary office that is handling the transaction.
Taxes on a transfer of Hak Milik (Freehold) land are payable on the Tax Object Acquisition Value ("NJOP") which is the higher of the amount paid for the property and the NJOP, or pre-assessed government value of the land and any improvements on it. This tax amount is payable on transfers for Hak Milik and HGB (Right to Build) title purchases. It is also payable for the creation of a Hak Pakai (Right to Use).
A potential purchaser should be aware that if Hak Milik land is purchased simultaneously with the grant of a Hak Pakai, then the tax payable will be calculated at 10% for each transaction, both for the transfer of the Hak Milik and on the grant of the Hak Pakai, making the total tax payable for the transaction at least 20% of the value of the NJOP of the land.
Tax and fees related with Freehold transaction
|Income Tax (PPh): 2.5%||Land and building acquisition duty (BPHTB): 5%|
|Land and Building Tax (PBB): 0.5% from taxable sale value||Luxury goods sales tax: 20%|
|Agent’s Commission: 5.5% (5% + 10% PPN)||Notary Fees: 1% – 2.5%|
The above information is provided as a guide only. The above information does not constitute and is not to be relied on as legal and/or taxation advice. Before entering into any transaction you should always discuss the relevant Indonesian legal, regulatory and taxation obligations with qualified advisors.