Hi, over the past several months we have been connecting and talking to our community partners about the rental property industry here in Bali, Indonesia. Some of the partners include legal service companies specializing in property law. So here are some of the insights we gathered about the rental property tax in Indonesia, so you don’t have to ask the same questions we did.
Indonesia property tax
Indonesia is a popular destination for investors looking to buy or own real estate in Bali. Thanks to its recent economic reforms, Indonesia does not solely depend on direct taxes for the country’s income. As a result, foreigners purchasing property in Indonesia pay one of the lowest property taxes in comparison to more developed nations.
As a property owner in Indonesia, it is important to understand the tax obligations associated with renting out your property. This article will guide you through the rental property tax system in Indonesia, including how it is calculated and paid.
What is property tax & PBB?
The land and building tax, or Pajak Bumi dan Bangunan (PBB), is a state tax and Indonesia’s most basic property tax. Individuals or entities who pay the PBB have the right to the land in terms of land control, land ownership, etc.
Property is evaluated in two ways: first, the land is valued, then any development that is present on that site is appraised. Property taxes are consequently determined based on both the land’s valuation and any buildings that could occupy it.Â
The land and Building Tax is paid annually and is administered by the local offices of the Directorate General of Taxes (Direktorat Jenderal Pajak, Kementerian Keuangan Republik Indonesia).
Property tax is also levied in the amount of progressive rates on the assessed value of the property.
How is rental property tax calculated?
Rental property tax is a tax that is imposed on property owners in Indonesia who rent out their property to tenants. The tax is calculated based on the rental income earned from the property.
Rental property tax in Indonesia is calculated based on the gross rental income earned from the property. Rental income or Lease Tax is levied in the amount of 10% of the Lease Value for tax residents in Indonesia. For non-tax Residents the Lease Tax due is 20% of the Lease Value.
For example, if you earn a gross rental income of IDR 100,000,000 from your rental property, your rental property tax would be IDR 10,000,000.
Rental property tax in Indonesia is paid through the annual tax return process. Property owners must report their rental income and calculate their tax liability on their annual tax return. The tax must then be paid to the tax office within the specified deadline.
Personal Income Tax in Indonesia
You may be categorized as a resident taxpayer or a non-resident taxpayer if you work for overseas employers or companies. If a foreign worker has lasted more than 183 days over any 12-month period, they are considered resident taxpayers.
The top marginal income tax rate for residents is 30%. (for income above IDR 500 million). The applicable tax rates are graduated according to yearly income. We listed from PWC about the individual taxpayer income tax rates are listed below:
| No. | Taxable Income | Tax Rate |
| 1. | Up to IDR 60 Â million | 5% |
| 2. | Over IDR 60 million – 250 million | 15% |
| 3. | Over IDR 250 million – IDR 500 million | 25% |
| 4. | Over IDR 500 million – IDR 5 billion | 30% |
| 5. | Over IDR 5 billion | 35% |
Non-resident taxpayers must pay a final withholding tax of 20% of their gross income; however, lower rates may be available due to tax treaties. Individual income tax is collected through third-party witholding in terms of tax payments.
PB1 (Vacation Rental Tax Object)
Vacation rental tax is a tax imposed on services provided by vacation rentals or facilities that provide lodging/rest services, including other related services for a fee. The tax rates are also set by each local government, but generally, it is 10%.
The principal amount of hotel tax payable is calculated by multiplying the rate by the hotel tax base. Example:
Land and Building Transfer Duty in Indonesia
During the transfer of land and construction rights in Indonesia, both purchasers and sellers should pay specific taxes. Sellers must pay for the income tax on the sale of land or property, and purchasers need to pay for the acquisition tax of land and building rights.
1. Sales Tax (PPH) Owed by Sellers
Sellers must pay for the income tax from the transfer of their land or building rights per the Indonesian Law GR 34/2016:
- 1% for simple flats or simple houses for their transfer of land or building rights
- 2.5% for regular structures, excluding simple homes or apartments for the transfer of their building rights
2. Acquisition Tax (BPHTB) Payable by Buyers
Acquisition duty is imposed on buyers for their acquisition of land or building rights. The rate is 5% and is determined based on the assessed value or transaction value.
Benefits of having a tax ID and property purchase tax
During our talk with Mr. Gede on our BV E Talk Investor webinar, we also discussed the sales and purchase of property tax as well as the benefits of having a tax ID for foreigners wanting to invest and purchase in Bali.
He discussed that a legal entity can acquire a property through a leasehold and HGB (Hak Guna Bangunan) title. And that acquiring a tax ID can lower the withhold tax of HGB by 10% .
To acquire and register as tax ID, foreigners should require a physical presence or intention to reside in Indonesia for more than 28 days (6 months) and have a KITAs (work permit). This would also be subject to worldwide income, which means foreigners should pay income tax in their domestic and absolve income depending on the jurisdiction.
Conclusion:
Rental property tax is an important tax obligation for property owners in Indonesia whether you’re an Indonesian resident or not. By understanding the tax calculation and payment process, property owners can ensure that they are in compliance with the tax laws and avoid any penalties.
If you read all the way down here, I hope it helped answer your questions about how property tax works in Indonesia. If you’re still confused, feel free to contact our community expert for more inquiries.Â
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