Beyond the nine stages · 4 min read
Tax: what you pay going in, while you hold, and on the way out
Most arguments about Indonesian property tax are two people talking about different moments. Separate the acquisition, the holding and the exit and it becomes tractable – including the part everyone asks last, which is how the money gets home.
Three moments, three different taxes
Almost every argument about Bali property tax is two people talking about different moments. Separate them – the acquisition, the holding and letting, and the exit – and it becomes tractable.
Going in: BPHTB
BPHTB – Bea Perolehan Hak atas Tanah dan Bangunan – is the duty on acquiring a right over land and buildings. The buyer pays it, at five per cent, and it must be settled before the deed can be executed. It is charged on the acquisition value with a tax-free threshold deducted, and that threshold is set regionally, so the same price produces a different bill in Badung and in Gianyar.
Two things follow. First, BPHTB applies to an acquisition of title – HGB through a PT PMA, or Hak Pakai. A lease is not an acquisition of title and does not attract it, which is a real five-per-cent difference between the routes that lease marketing does not always spell out. Second, the seller pays their own tax on the same transaction: a final income tax on the transfer of land and buildings at two and a half per cent of the transaction value under the standard regime. Between them the state takes seven and a half per cent out of a transaction, and who bears which half is settled by law rather than by negotiation.
While you hold: PBB, and the tax on rent
PBB – Pajak Bumi dan Bangunan – is the annual land and building tax. It is charged on the assessed value, the NJOP, which on foreign-purchased property is usually well below what was actually paid. It is a small number and it is not the one that matters.
The one that matters is the tax on rental income. Rental of land and buildings attracts a ten per cent final tax on gross rent. Final means it discharges the liability on that income, and it means the charge is on the gross – so it does not fall when your costs rise. A brochure quoting a yield before tax is quoting a number that will lose a tenth of the top line, not a tenth of the profit.
Where the property is run as short-stay accommodation rather than let on a conventional tenancy the analysis differs. An accommodation business operated through a PT PMA is generally taxed on its profits under the ordinary corporate income tax regime, currently twenty-two per cent, rather than on gross under the final rental tax, and regional hospitality charges may apply on top and are normally billed to the guest. Which regime applies to your arrangement depends on your actual contracts, and it is the most valuable hour you will buy from an Indonesian tax adviser.
Getting the money out
Repatriation is legal and routine. Indonesia does not operate exchange controls on ordinary current-account transfers, and there is no restriction on a foreign shareholder taking profits out of the country. What there is, is withholding.
A PT PMA distributing a dividend to a non-resident shareholder withholds tax at twenty per cent, reduced where a double tax treaty applies and where the paperwork – a certificate of tax residence, filed in advance – is in order. Indonesia has a wide treaty network and reduced rates commonly fall in the ten to fifteen per cent range. Relief is granted on evidence rather than assertion, and it is granted at the time of payment: sorting the certificate after the withholding has happened turns it into a reclaim, and reclaims are slow.
Note also that the dividend is paid out of profit the company has already been taxed on, and that your own country will then want to look at it. Whether you get credit for the Indonesian tax depends on your own residence and the relevant treaty. Model the whole chain, not one link of it.
The practical list
- Get an Indonesian tax number (NPWP) if you are holding through a company or are resident. Transactions are slower and more expensive without one.
- Keep the company filing monthly, not annually. Late-filing penalties compound, and licences depend on compliance.
- Ask the developer in writing which taxes on the transaction they are paying and which you are.
- Sort the treaty position and the certificate of residence before the first distribution, not after.
This is a map, not advice. Rates and thresholds change, regional practice varies, and your own country's treatment is at least half of the answer.
Written by us · 4 min read · beyond the nine stages