Land and Building Taxes in Indonesia

Are you planning to buy a land/building? Still unfamiliar with the process of buying and selling a land/building? Confused about the costs associated with taxes that must be incurred in the process of buying and selling land? Instead of getting dizzy, let’s first learn the complete stages of Land and Building Taxes in Indonesia below!

In buying and selling process from one person/legal entity to another person/legal entity is subject to tax in each transaction. There are several taxes that must be paid in the process of buying and selling land/building, in this case, the taxes contained in each process of buying and selling land/buildings will be discussed.

Taxes that exist in every process of buying and selling land/building are:
1. Land and Building Tax (PBB)
2. Income Tax (PPh)
3. Acquisition Duty of Right on Land and Building (BPHTB)

1. Land and Building Tax (PBB)

Land and Building Tax (PBB) is an annual tax, the amount of which is charged based on the object. Land and Building Tax (PBB) is applied to land and buildings. Land and Building Tax Law, hereinafter referred to as PBB Law, is Law Number 12 of 1985 concerning Land and Building Tax as amended by Law Number 12 of 1994 concerning Amendments to Law Number 12 of 1985 concerning Taxes. Earth and Building.

Land and Building Tax Objects, hereinafter referred to as Tax Objects, are land and/or buildings that are tax objects of Plantation Sector Land and Building Tax, Forestry Sector Land and Building Taxes, Oil and Gas Mining Sector PBB, Mining Sector PBB for Geothermal Exploitation, Mineral or Coal Mining Sector PBB, and PBB Other Sector.

Everyone who owns land and or buildings has an obligation to pay Land and Building Tax (PBB) every year. Every time you pay, the owner of the land and or building will get a receipt for the deposit of Land and Building Tax (PBB).

If you want to do the process of buying land and or buildings, you have the right to ask the owner of the land and or building to provide the proof to you. This is because, in addition to checking the land certificate, you also have to check the Land and Building Tax Payment Receipt (STTS PBB) this aims to ensure that the land and or buildings are not in arrears in payment of Land and Building Tax (PBB). Because before the sale and purchase of land and or buildings can be carried out, the Land and Building Tax (PBB) must be paid.

2. Income Tax (PPh)

Income Tax (PPh) is a tax that is charged or must be implemented by the seller of land and/or buildings. Income Tax (PPh) is income from the transfer of rights to land and/or buildings through the sale and purchase of land and or buildings. Based on Government Regulation No. 34 of 2016 the amount of Income Tax (PPh) from the transfer of land and/or building rights is 2.5% (two point five percent) of the total value of the transfer of land and/or building rights.

3. Acquisition Duty of Right on Land and Building (BPHTB)

The Acquisition Duty of Right on Land and Building (BPHTB) is regulated by the Law of the Republic of Indonesia Number 20 of 2000 concerning Amendments to Law Number 21 of 1997 concerning Fees for Acquisition of Rights on Land and Buildings. The fee for the acquisition of land and building rights is a tax imposed on the acquisition of land and or building rights, hereinafter referred to as a tax. The Customs Tax on the Acquisition Duty of Right on Land and Building (BPHTB) is charged to the person or legal entity that makes the purchase of land and/or buildings. The amount of the BPHTB value is 5% of the sale value of the tax object (NJOP) which has been deducted from the acquisition value of the non-taxable tax object (NPOPTKP). The value of the NJOP in each region is not the same according to local conditions.

The main objective of tax due diligence for a purchaser is to determine the past, present, and future tax liabilities of the target entity, including disclosed, undisclosed, realized, and unrealized tax liabilities. Tax due diligence will help you establish the purchase price, warranty clause, and the limitation of taxation responsibilities within the stock sale and purchase agreements, determine the target entity’s tax profile, and help plan the appropriate acquisition and funding structures. In conducting tax due diligence, we combine our expertise and experience in accounting and law.

Disclaimer:

The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. In addition, laws and regulations in Indonesia are often subject to change. Please contact us as your consultant to get an up to date information and accurate advice. For more information click here and you can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.