Real Estate industry is a sector that has bright prospects in the future. This positive outlook is supported by an increasingly large population, which can impact demand in the property sector. As a result, there are many developments in various areas such as residential areas, apartments, hotels, shopping centers, and office buildings.
Even though it was affected by the COVID-19 pandemic, this sector still demonstrates movement in a positive trend, both in the residential and commercial property markets. It is in line with the condition of Indonesia’s economic growth, which also continues to move positively.
The existence of this sector is also inseparable from the tax imposed on it, where every property sale and purchase transaction will be tax object to property tax. Taxes on the property and real estate sectors can be relied upon as tax revenue for the state. This is because in the property and real estate business, there are many aspects of taxation, including the following:
- Land and Building Tax (PBB)
Land and building tax (PBB) is a tax on land and buildings subject to owners due to economic gains or economic status as a result of ownership of the land and buildings. The PBB object are land and/or buildings located in the territory of the Republic of Indonesia. The definition of the land is the surface of the earth and the components beneath it. While the definition of a building is a technical construction that is planted or permanently attached to land and/or water. Since this tax is collected and managed by the local government, each district city area is given the authority to set the rate of PBB, which may differ in each region. The highest PBB rate is imposed at 0.5% of the Taxable Sales Value (NJKP). PBB is a tax that is imposed and paid by parties who benefit from the right to and/building which is the object of the regional tax instrument, so that the payment is paid to the Local Government.
- Acquisition Duty of Right on Land and Building (BPHTB)
Acquisition Duty of Right on Land and Building (BPHTB) is a type of tax that must be paid when purchasing a house or other property. This fee is imposed on all property transactions, both new and old properties purchased from developers or individuals. The object of BPHTB is the acquisition of land and/or building rights. Rights of land and/or buildings are rights over land, including management rights, along with the buildings on it. Similiar to PBB, BPHTB is also the domain of taxes that are collected and managed by each regional government. BPHTB rates are determined by district/city regional regulations at a maximum of 5% of the Acquisition Value of Taxable Objects (NPOP) after deducting the Acquisition Value of Non-Tax Objects (NPOPTKP). BPHTB is a tax imposed and paid by the buyer of land and/or buildings which is the object of the regional tax instrument, so that the payment is paid to the Local Government.
- Final Income Tax from the Transfer of Land and Building Rights (Final Income Tax under Article 4 (2) / PPh Final)
This tax is imposed on the transfer of land and building rights to both individuals and corporations. Objects of Final Income Tax under Article 4 (2) covers income from transactions on the transfer of assets in the form of land and/or buildings which include sales, exchanges, agreements to transfer rights, relinquishment of rights, transfer of rights, auctions, grants, inheritance, or other means agreed. Final Income Tax under Article 4 (2) at a rate of 2,5% is imposed on the transfer of rights over land and/or buildings, including real estate businesses, from the gross amount of the transfer value. Meanwhile, Final Income Tax under Article 4 (2) rate of 1% is imposed on the transfer of small houses and small flats from the gross amount of the transfer value. This tax imposed and paid by the seller as final income tax which is the object of the central tax instrument, so that the payment is paid to the Central Government.
- Final Income Tax from Land and/or Building Rentals (Final Income Tax under Article 4 (2) / PPh Final)
In addition to the income tax imposed on the transfer of land and building rights, the objects of Final Income Tax under Article 4 (2) can also be in the form of income from land and/or building rentals, either part or all of the building acquired by an individual or entity, including income received or obtained by an individual or rights-holding corporate from an investor related to the implementation of the Build Operate and Transfer Agreement. The rate of Income Tax on Land and/or Building Rentals is imposed at 10% of the gross amount of the rental value of land and/or buildings. This tax imposed and paid by the seller as final income tax which is the object of the central tax instrument, so that the payment is paid to the Central Government.
- Value Added Tax (PPN)
Value Added Tax or VAT is imposed on property transfer and rentals at 11% conducted by a taxable entrepreneur (PKP). However, on the sale of small houses (RS) and very small houses (RSS), the VAT is exempted. The criteria for this category are houses with the building size not exceeding 36m²; the land measuring not less than 60m²; the selling price not exceeding the limit in accordance with applicable regulations; and the house is the first property owned by the low-income individual, used as a private residence. VAT is tax imposed and paid by buyer which is the object of the central tax instrument, so that the payment is paid to the Central Government.
- Luxury Goods Sales Tax (PPnBM)
Sales Tax on Luxury Goods (PPnBM) is a tax imposed on the consumption of Taxable Goods classified as luxury in the Customs Area. In the property and real estate sectors, PPnBM is only charged for properties purchased from developers that meet the criteria for luxury goods. Criteria classified for luxurious goods, as referred to, are houses and their land, with a selling price or transfer price of more than IDR 30.000.000.000 (thirty billion rupiahs) or a building area of more than 400m2 (four hundred square meters), apartments, condominiums, and its kind, with a selling price or transfer of more than IDR 30.000.000.00 (thirty billion rupiahs) or a building area of more than 150m2 (one hundred and fifty square meters) are subject to PPnBM at a rate of 20% and only applies to primary properties. Sales Tax on Luxury Goods is tax imposed and paid by buyer which is the object of the central tax instrument, so that the payment is paid to the Central Government.
The existence of the industrial and property sectors is very impactful, hence playing an essential role in the Indonesian economy for its multiplier effect on other industries. In a property sale and purchase transaction, there are obligations to the state that must be fulfilled by both parties, that is the payment of taxes in the context of transferring property which must be carried out by the buyer and seller.