FREEHOLD LAND TITLE (HAK MILIK) TRANSACTION TAXATION AND FEES IN BALI (INDONESIA)
In the sale and purchase transactions of land, both sellers and buyers are taxed. Following are taxation glossaries and a brief summary of the typical costs involved in transfers of FREEHOLD land titles in Indonesia, in a property transaction between private parties, the following taxes shall apply:
1. Income Tax (Pajak Penghasilan/PPh)
The legal basis for the imposition of Income Tax for land sellers is Article 1 paragraph (1) and (2) of Government Regulation Number 34 of 2016 concerning Income Tax on Income from Transfer of Land and/or Buildings, and Agreement on Sale and Purchase of Land and/or Buildings With Changes.
Previously the tax obligation due to the seller of the property was 5% of NJOP or sale value, whichever is higher, now it has been halved to 2.5% (1% for houses that qualify as Rusun/Rumah Sederhana).
So the amount of income tax is lowered to 2.5% (two point five percent) of the gross amount of the transfer of land and/or building rights. Payment of Income Tax shall be made at the bank receiving payments of sale and purchase transactions which will then be validated at the local tax office.
There are some exceptions to not pay the income tax
a. Transaction value is lower than 60 million.
b. The sale is done in the framework of land acquisition for public interest.
c. Grants to blood relatives d. Heritage
2. Land & Building Tax (Pajak Bumi & Bangunan/PBB)
The general rate of the annual Land & Building Tax is 0.5% of the assessed value of the land and/or land and its buildings. Values are reassessed every three years (or every year in rapidly developing areas). Luxurious residential properties valued in excess of IDR 1 billion are taxed at a rate of 0.2%, while exemptions are granted for buildings valued under IDR 8 million and land and buildings used for religious, social, educational and other public uses.
3. Agency/Consultancy Fee
(5% + (10% of such 5% for government tax) so 5.5% as per the applicable standard or as agreed by both the seller and the agent/agent’s company.
1. Land and building acquisition duty (Bea Perolehan Hak atas Tanah dan Bangunan/BPHTB)
Subject to Acquisition of Land and Building Rights (“BPHTB”), i.e. taxes imposed on the acquisition of land and/or building rights. According to Article 5 of Law No.21/1997, the tax rate of BPHTB is calculated at 5% (five percent) of the Acquisition Value of the Taxable Object (“NPOPKP”). Individuals or legal entities/companies obtaining rights to land or buildings are required to pay a Land and Building Transfer Duty (BPHTB) of 5%. The 5% duty is calculated based on the transaction value or the assessed value, whichever is higher.
BPHTB is a tax imposed on the acquisition of rights to land and or building to be borne by the buyer of the property. Not only on the occurrence of the sale and purchase of land, but also on any acquisition of land and building rights (exchange, grant, inheritance, entry of land into the company, etc.).
This tax is required to be paid when the transfer of rights or the signing of the deed of sale and purchase in a notary/PPAT. In accordance with the Decree Number 28 Year 2009 on Regional Tax and Regional Retribution (PDRD) in replace of the Law of 20 year 2000 (20% for all regions, 16% of the area of origin) BPHTB collection becomes the full authority (100%) further through local authority/Perda, effective from January 1, 2011, in this case, Bali Government. Although we have read several articles of such recent discussions in the local government body that the percentage due for BPHTB is not necessarily 5%, however we have not had the amendment for such to have a valid implication yet so far.
The Value of Taxable Object or transaction price may be bigger or may be smaller than the Selling Value of Taxable Object (NJOP), depending on the seller’s agreement and the buyer sometimes the transaction price can be the same as the NJOP value. If the transaction price is smaller than NJOP, then the basis for determining NPOP is NJOP value. Conversely, if the transaction price is greater than NJOP, then the value of NPOP determination based on the transaction price is the highest value between NPOP and NJOP.
In addition to NPOP and NJOP, other factors that need to be considered in determining the amount of BPHTB is the Value of Non Taxable Object out of Taxable Object (NPOPTKP). NPOPTKP is the NPOP deduction value before the tariff of BPHTB. For example, if the land transaction price is Rp. 100.000.000, then before the transaction price is subject to tariff of BPHTB (max 5% according to the Law of DPRD) first the transaction price is reduced NPOPTKP, for example minus NPOPTKP of Rp. 80,000,000 (minimum is 60 million) for DKI Jakarta area or Rp. 60,000,000 for Bali Province. Therefore the buyer’s deductible amount to tax value becomes bigger than the seller’s as seller’s tax rate is not subject to NPOPTKP (seller gets no deductible amount to tax value).
Each region has different NPOPTKP, depending on the local regulations. For Badung region, for example, NPOPTKP is set at Rp 60,000,000 for land sale and purchase transactions and Rp. 300,000,000 for the acquisition of rights due to inheritance or grant of a will received by an individual who is still in a blood relation.
BPHTB = (Transaction Value – Non Taxable Income Tax Value *) x 5%
* NPOPTKP in each region depends on local government policy (as for Bali, it is Rp 60,000,000)
Example of calculating BPHTB in transactions on buying and selling land:
Wayan bought land owned by Ketut with the sale and purchase of Rp. 2,000,000,000.
Then the seller’s tax and buyer’s taxes are as follows:
Wayan/Buyer Purchase (BPHTB) NPOP: Rp 2,000,000,000 (-) NPOPTKP: Rp 60,000,000
Taxable NPOP: Rp 1,940,000,000
BPHTB: 5% x Rp 1,940,000,000 = Rp 97,000,000
Ketut/Sales Tax (PPh) NPOP: Rp 2,000.000.000 -> Taxable NPOP: Rp 2,000,000,000
(as per PP No. 34/2016 ([0% for government, [1% for RS-RSS entrepreneur], 2.5% * NPOP for private individual)
Income Tax: 2.5% x Rp 2,000,000,000 = Rp 50,000,000
2. Deed of Sale and Purchase (Akta Jual Beli/AJB) Fee
Please note first in the PP No. 37 of 1998 article 2 paragraph 1, it is mentioned that the Deed of Sale and Purchase (AJB) made by PPAT (Land Deed Official), not a notary or BPN. The fee to be paid is usually about 1% of the transaction value, but this figure is still negotiable.
The payment is borne by the buyer or in accordance with the agreement. It could also be borne by both parties. Before taking process of AJB, you must do a land certificate check/examination, make sure if seller has fulfil all the payment of PBB for his/her land & building, paid off the Income Tax, and BPHTB.
3. Land/Property Ownership Transfer Fee (Bea Balik Nama/BBN)
This applies to the buyer when the process of transferring the ownership name of the property on the certificate from the seller to the buyer. For the sale and purchase of property through the developer, BBN is managed by the developers and buyers just pay for it. If the property is purchased from an individual, the cost and paperwork of this BBN are taken care by the purchaser. The amount of BBN in each region varies, but on average about 2% of the transaction value. BBN = 2% x Transaction Value
4. Fee of Land/House Certificate
There are several things need to be checked before going through the process of transferring into House/Land Certificate as follows:
• Before making a transaction, be sure to check the authenticity of the relevant agency certificate, ie the local Land Agency. Usually to check the validity there is a cost behind the name of land/house certificates around Rp 25 thousand to Rp 100 thousand. If the plot to be purchased has not been certified, try checking the ownership record and the plot history in the kelurahan or the local subdistrict office, as well as the proof of the land boundary.
• For the cost of its own maintenance depends on the value of land NJOP. For example if the value of the land reaches Rp 4,000,000 then the cost becomes Rp 54,000 with the length of time the process of making the name behind five working days.
• If the process of BBN is done through a notary service it will cost about 0.5% to 1% fee of the total transaction value. The price includes the Deed of Sale and Purchase (AJB), BBN and Notary Services. Time of process itself reaches 30 days.
• Do not underestimate the process of transferring the ownership name of the land certificate, considering the land to be one of the most promising investments, as well as the home. If you want to invest in land or house, make sure the seller cooperates to complete the data to transfer the name so you do not lose or waste your time in the future
To legalize juridical change, data and procedure stages are required. There are 2 paths you can choose to record changes in juridical data, i.e., take care of it by yourself to the Land Office or ask for PPAT assistance.
1. Request PPAT Assistance; then you must submit a request file behind the name signed by the buyer, purchase deed from PPAT, original land certificate, buyer and seller’s ID, proof of payment of Income Tax Installment Letter (SSP PPh), and proof of payment of Letter of Customs and Building (SSBBPHTB).
2. Taking care of themselves; the required data is the same as if you requested PPAT assistance plus a letter of reference from PPAT, Income Tax Form Land and Building Tax (SPPT PBB), right transfer permit (for flats and State land), and a statement of potential recipient.
Once the file is collected, the steps taken to rename the land certificate are:
1. Bring the file to the Land Office, after which they will issue proof of receipt of the request behind the name.
2. The Land Affairs Office will cross out the name of the old rights holder in black ink and change it with the new rights holder in the land and certificate books.
Head of Land Affairs Office or appointed Officer shall affix paraf/initial and date of record of change. These three steps are completed within 14 days after submission.
5. VAT charges
The general value of Value Added Tax (VAT) is 10% of the value of the transaction. Minimum transaction value collected above Rp 36 million. VAT is charged only once when purchasing property, either from developers or individuals.
Besides, this tax is also imposed on the construction of homes that are done by themselves by individuals or legal entities. Payments are made after the transaction is completed and done every 15th. Then, report to the local tax office no later than every 20th.
6. Notary fees
The cost of each notary may vary and is generally between 1% – 2.5%, typically depending on the complexity of the acquisition and the scope of services requested. As the buyer chooses the notary then the notary fees are usually paid for by the buyer and the buyer must negotiate the fees with the notary. But sometimes the payment of notary fees are not only by the buyer, but may be paid by both parties, ie sellers and buyers, depending on the agreement or where 2 notaries are working in collaboration. The Land Deed Officer (PPAT) or otherwise known as a public notary, has an important role in buying and selling transactions. This is because the notary is the only party authorized to determine the validity of the process of buying and selling. The following details is the breakdown of such 1% – 2.5% amount that should be paid to a notary:
• Certificate check fee: Rp 100,000
Checking the certificate must be done before the sale and purchase process is done to ensure that the purchased house is not on the land dispute, no confiscation records, and others. Checks were done at the local land office.
The cost of checking alone will certainly vary, depending on the region. In general, the cost should be around Rp50,000 to Rp300,000. The payments are borne by the home buyer, but this also depends on the deal at the beginning.
• SK fee: Rp1,000,000
• Tax validation fee: $ 20
• AJB fee: Rp2,4 million
• BBN cost: Rp750,000
• Fees of Power of Attorney of Right to Insurers’ Insurance Rights: Rp250,000
• Cost of Deed of Deposit Insurance: Rp1.2 million
When added, the cost to pay a notary can reach Rp 5 million. The number is not certain because there are notaries who fix the price in share between the seller and the buyer.
7. Luxury Goods Sales Tax
Sales of luxury houses, apartments, townhouses, and condominium units are subject to 20% sales tax. The Luxury Goods Sales a Tax is based on luxury houses and townhouses which have a selling price of IDR 20 billion (US$1,483,760) and above and luxury apartments and condominium units which have a selling price of IDR 10 billion (US$741,880) and above.
Hope this article will help you to know the taxes and fees that must be paid by the property seller and buyer, so you can go through the process of buying and selling property smoothly.
LEASEHOLD TITLE (HAK SEWA) TRANSACTION TAXATION AND FEES IN BALI (INDONESIA)
RIGHT TO USE (HAK PAKAI) LAND TITLE TRANSACTION TAXATION AND FEES IN BALI (INDONESIA)
Please contact us for further refer you to trustable lawyer/legal and/or tax advisor and/or notary to assist you best.
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