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Guide to rental property tax in Indonesia

img Adiel Ananda | December 9, 2022

Hi, I’m Adiel a marketer at Bukit Vista. And over the past several months 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 I learned about the rental property tax in Indonesia, so you don’t  have to ask the same questions I did.

Indonesia property tax

Indonesia is a popular destination for investors looking to buy or own real estate. Thanks to its recent economic reform, 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 for 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 on both the land’s valuation and any buildings that could occupy it. 

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 at 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.

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.

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 on how property tax works in Indonesia. If you’re still confused, feel free to contact our community expert for more inquiries. 

If you are sick of all the hassle of managing your own property or fed up with other property management companies, we’re here to hear your needs. Choose a property manager who can bring you maximum revenue for your property, and transform your property hassle free.

Feel free to contact us for a free consultation to see what Bukit Vista can do for you.

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