Investing in property in Bali can be a lucrative venture, but it’s important for foreign investors to understand the landscape of property taxes and related financial obligations. Navigating the tax environment in Indonesia, particularly Bali, requires a clear understanding of the various taxes applicable to property transactions and ownership. Here’s a comprehensive overview to help you get started:
Property Acquisition Tax or Transfer Tax
When purchasing property in Bali, you will be subject to the property acquisition tax, officially known as Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB). This tax is imposed on the transfer of property ownership and is generally calculated at a flat rate of 5% based on the property’s transaction value or assessed value, whichever is higher. The buyer is responsible for paying this one-time tax at the time of acquisition.
In Indonesia, the BPHTB is calculated based on the Tax Object Acquisition Value (Nilai Perolehan Objek Pajak, NPOP), minus any non-taxable real estate objects (Nilai Perolehan Objek Pajak Tidak Kena Pajak, NPOPTKP). The BPHTB must be paid before the notary will sign the deed of transferring rights. This tax is generally 5% of the property’s transaction value for the buyer or the assessed value, whichever is higher. It’s a one-time tax paid at the time of acquisition.
Calculate BPHTB tax
Here is the formula to calculate the BPHTB tax: BPHTB Tax=5%×(NPOP−NPOPTKP)
Annual Property Tax or PBB
Once you own property in Bali, you will be required to pay an annual property tax known as the Land and Building Tax (Pajak Bumi dan Bangunan, or PBB). This tax is imposed on property owners and is calculated based on the assessed value of the land and buildings. The rate typically ranges from 0.1% to 0.3% of the assessed value, with the exact rate and valuation determined by the local government.
The PBB tax system is administered by the Directorate General of Taxes (Direktorat Jenderal Pajak, Kementerian Keuangan Republik Indonesia). All property owners in Indonesia are required to pay this tax annually. It is crucial to ensure timely payments to avoid penalties and potential legal consequences.
Previously, the PBB rate varied between 0.01% and 0.3%. However, in 2022, the Indonesian government increased the PBB rate to 0.5%.
Calculate PBB tax
To calculate the PBB tax, you need to know the NJOP and NJKP:
- NJOP (Nilai Jual Objek Pajak): This is the average price obtained during a real estate transaction. If there has not been a recent transaction, the NJOP is determined by the local government by comparing the property with similar properties.
- NJKP (Nilai Jual Kena Pajak): This is the taxable sale value, calculated based on the NJOP.
You can calculate the NJKP with the following formula:
NJKP = 40% or 20% x (NJOP – NJOPTKP)
- 40% for properties above IDR 1 billion
- 20% for properties under IDR 1 billion
- NJOPTKP is IDR 12 million ($732)
- After calculating the NJKP, the PBB tax can be calculated with the following formula:
For example, we take a property with an NJOP value of IDR 5.8 billion.
- NJKP = 40% x (IDR 5,800,000,000 – IDR 12,000,000) = IDR 2.32 billion
- PBB = 0.5% x IDR 2,315,200,000 = IDR 11.58 million
- According to this calculation, the property owner has to pay IDR 11.58 million ($706) every year for PBB tax.
The Indonesian tax authorities send taxpayers a tax-due notice letter (Surat Pemberitahuan Pajak Terutang/SPPT) with the tax amount to be paid. The PBB tax must be paid within six months after the SPPT issue. Source.
Value Added Tax (VAT)
The Value Added Tax (VAT) is applicable when purchasing or leasing property or land from a commercial entity, such as a constructor or developer. This tax, known locally as Pajak Pertambahan Nilai (PPN), is a significant part of property transactions in Indonesia. However, VAT does not apply to transactions involving secondary properties that have already been used. As of now, the VAT rate in Indonesia is set at 11%.
Income Tax on Rental Income
If you plan to rent out your property, the rental income will be subject to income tax. Rental income is also subject to taxation as Personal Income Tax for residents. However, for non-resident taxpayers, rental income is subject to a Withholding Tax, often referred to as Rental Income Tax or Lease Tax. Tax residents must file their Personal Income Tax returns by March 31 of the following year, and the payment deadline is the 10th of the subsequent month.
Foreigners who stay in Indonesia for more than 183 days within a year are classified as Indonesian tax residents. As tax residents, they are required to pay Personal Income Tax, known as Pajak Penghasilan Orang Pribadi, which operates on a progressive scale based on their annual earnings. The Personal Income Tax rates in Indonesia range from 5% to 35%, depending on the individual’s yearly income. Source.
| Income | Tax rate |
|---|---|
| Up to IDR 60 million | 5% |
| IDR 60 million – IDR 250 million | 15% |
| IDR 250 million – IDR 500 million | 25% |
| IDR 500 million – IDR 5 billion | 30% |
| Over IDR 5 billion | 35% |
For foreginers, the rental income of non-resident individuals in Indonesia is subject to a Withholding Tax of 20% of the gross rental income. Even if a non-resident has no permanent residence in Indonesia, they still need to pay taxes on any income they earn inside Indonesia. The 20% Withholding Tax is the default rate and applies unless a Double Tax Agreement (DTA) exists between Indonesia and the non-resident’s home country. The PPh should be filed by the 20th of the following month and paid by the 10th of the following month.
| Withholding Tax | Tax rate |
|---|---|
| Indonesian residents | 10% |
| Non-residents | 20% |
Benefits of Having a Tax ID and Understanding Property Purchase Tax
A legal entity can acquire property through a leasehold and Hak Guna Bangunan (HGB) title. He highlighted that obtaining a tax ID can reduce the withholding tax on HGB by 10%.
To acquire and register for a tax ID, foreigners must have a physical presence or the intention to reside in Indonesia for more than 28 days (6 months) and possess a KITAS (work permit). This also subjects them to worldwide income taxation, meaning they must pay income tax in their home country and may absolve income depending on their jurisdiction.
Conclusion
Understanding the property tax landscape in Bali is essential for foreign investors to make informed decisions and maximize their investment returns. At Bali Exception Real Estate Agency, we are committed to helping our clients navigate these complexities. With our local knowledge and expertise, we can guide you through every step of the process, ensuring your investment is both compliant and profitable. Whether you are looking to buy, sell, or rent, we are here to support your real estate journey in Bali.
