Indonesia's real estate market has experienced significant growth in recent years, making it an attractive investment destination. However, with property ownership comes the responsibility of understanding the property value and managing the various taxes imposed by the government.
This year Indonesia has again introduced new property tax incentives to further stimulate the real estate sector and strengthen the country's economic resilience.
In this comprehensive guide, we will explore all the possible property taxes in Bali and highlight the key points that property owners need to be aware of.
Bali's Land And Building Tax (PBB)
Bali's Land and Building Tax (Pajak Bumi dan Bangunan, or PBB) is an essential obligation for property owners in Bali. This annual tax is calculated based on the assessed value of the property, known as the Tax Object Selling Value (NJOP). The rate varies depending on the type and location of the property, but typically ranges from 0.3% to 1% of the NJOP value. The rate is lower for residential properties and higher for commercial properties. It's important to note that the NJOP value is usually lower than the market value of the property, which may affect the amount of tax payable.
One of the most important issues to be aware of is the payment deadline for Land and Building Tax. Real estate owners must ensure that they pay this tax on time to avoid penalties and additional charges. It's also important to keep abreast of any updates or changes in rates, as these can affect the amount owed.
Value Added Tax (PPN)
Bali's Value Added Tax (Pajak Pertambahan Nilai or PPN) is a significant factor affecting business transactions in the region. The PPN is a consumption tax levied on the sale of goods and services and affects both businesses and consumers.
The current rate of Value Added Tax (Pajak Pertambahan Nilai or PPN) in Bali is 11% of the sale price of the property. In the real estate sector this tax applies to certain types of transactions, such as the sale of commercial properties and leaseholds. It is usually paid by the buyer, although in some cases the seller may agree to pay or share the cost. The PPN rate for luxury properties is usually higher than the standard rate. It's important for property owners in Bali to understand the PPN regulations and ensure compliance with the tax system to avoid potential complications during property transactions.
The Transfer Tax in Bali (BPHTB)
The Property Transfer Tax in Bali, also known as Bea Perolehan Hak atas Tanah dan Bangunan (the BPHTB tax), is a crucial consideration for property transactions in the region. This tax is levied on the transfer of property ownership and is usually regulated and collected by local governments. It applies when there is a change in property ownership for various reasons, such as the purchase and sale of property, inheritance or gift. The tax is calculated on the transaction value of the property and is usually paid by the buyer. The rate varies depending on the location of the property and ranges from 2% to 5%.
Please Note: The Property Transfer Tax (Bea Perolehan Hak atas Tanah dan Bangunan/BPHTB) and the Land Tax (Pajak Bumi dan Bangunan/PBB) are two different taxes in Indonesia.
Let's review once more:
- Property Transfer Tax is levied on the transfer of property ownership and is typically paid by the buyer. It is calculated on the basis of the assessed value of the property or the transaction value, with rates ranging from 2% to 5% depending on the location of the property.
- Land Tax is an annual tax based on the assessed value of the property, usually set at a flat rate of 5% and paid by the vendor. The Land Tax is also known as the Land Acquisition Tax and is levied on property transactions.
Understanding the differences between these two taxes is essential for property buyers and sellers to accurately assess their tax obligations and make informed decisions during property transactions.
Bali’s Capital Gains Tax
Capital Gains Tax in Bali is an important consideration in property transactions. Gains on the sale of land and buildings are subject to a final tax of 2.5% of the transaction value or the taxable sale value, whichever is higher. However, gains from the sale of Indonesian assets by foreigners are taxed at 5% of the gross proceeds, unless reduced by a tax treaty. The capital gains tax rate is influenced by various factors, including the length of time the property has been owned and the tax residency status of the owner. For example, if the owner has held the property for 10 years, the capital gains tax rate may be different.
Being well informed about Capital Gains Tax is crucial to making informed decisions and effectively managing the financial aspects of property transactions in Bali.
Nota Bene: Exemptions and deductions from Capital Gains Tax in Bali are available for certain groups. For example, foreigners who reside in Indonesia for less than 183 days in a 12-month period are not required to pay Indonesian individual tax. Non-Indonesian residents are taxed at a flat rate of 20%, which can be reduced to 10% if their country has a double taxation treaty with Indonesia. This flat rate includes income from rental property. In addition, some exemptions and deductions are available for low-income earners, religious institutions, the disabled and other eligible groups.
However, it's important to consult with local authorities and tax professionals to keep abreast of current regulations and ensure compliance with tax laws.
Bali’s Construction Tax
The Construction Tax in Bali, also known as "Bea Materai", is a levy imposed on landowners when they develop a building on their land. The tax rate is typically 1.75% of the building's construction budget and is paid upon completion of the construction project, contributing to local infrastructure and development initiatives. It's important for property owners and contractors to be aware of these obligations, as failure to comply with the tax can result in penalties. If a contractor is used to carry out the construction work, the contractor is responsible for paying the Construction Tax. Understanding the process and ensuring timely payment of the tax is crucial for property owners and contractors to effectively manage their financial obligations during the construction phase in Bali.
Please note: The Construction Tax and the Land and Building Tax (Pajak Bumi dan Bangunan/PBB) are two separate taxes in Indonesia.
Unlike the Construction Tax, the Land and Building Tax (PBB) is an annual tax levied on properties in Indonesia, including Bali, based on their assessed value. It is split into two types of tax: Land Tax (Pajak Bumi) and Building Tax (Pajak Bangunan). Land Tax is levied on the value of the land, while Building Tax is levied on the value of the building. The assessment is based on factors such as the location, size and type of the property. Both Land and Building Tax are paid annually by the person or company with the right to control and own the land. Understanding the differences between these two taxes is essential for property owners.
Rental Income Tax
Rental Income Tax in Bali for 2024 varies depending on the tax residency of the real estate owner and is often represented as Personal Income Tax, Corporate Income Tax and Withholding Tax.
Indonesian tax residents are subject to Personal Income Tax of between 5% and 35% on their rental income.
Non-resident individuals are generally subject to a Withholding Tax of 20%, which can be reduced to 10% if a Double Taxation Agreement (DTA) is in place.
Corporate Income Tax is payable at a rate of 22% if the property is held by a PT PMA.
It's important for property owners to be aware of these tax obligations to ensure compliance and to make informed decisions regarding their rental properties.
The Main Luxury Taxes In Bali
There are two basic taxes for luxury property owners: the Luxury Tax (Pajak Penjualan atas Barang Berkualitas Tinggi, or PBBT) and Luxury Sales Tax (Pajak Penjualan atas Barang Mewah, or PPnBM). And these taxes are two different taxes in Indonesia.
- The Luxury Sales Tax, also known as PPnBM, is a tax levied on the delivery or importation of specific taxable luxury goods, such as luxury cars, apartments or houses. Luxury Sales Tax rates can range from 10% to 125%, with a maximum of 200%.
- On the other hand, the Luxury Tax (PBBT) is a tax specifically related to the sale of luxury real estate, with a rate of 20%. The Luxury Tax is usually the responsibility of the buyer, but in some cases the seller may be required to pay a portion of it. It's important for individuals involved in luxury property transactions to be aware of the specific tax implications and obligations associated with each of these taxes to ensure compliance.
Learn the difference between these taxes well in advance to avoid mistakes.
Other Property Taxes in Bali
There are some additional taxes in Bali you should remember about: The Name Change Tax and the Documentary Stamp Tax (DST).
- The Name Change Tax in Bali, also known as Bea Balik Nama (BBN), is a small tax levied to allow the name on a property certificate to be changed from the seller to the buyer. It is calculated by dividing the price per square metre of land by 1,000 and multiplying by the total land area of the property. This tax is part of the property transfer process and is one of several taxes that individuals need to be aware of when buying or selling property in Bali.
- Documentary Stamp Tax (DST) is a mandatory tax imposed on legal documents or instruments executed, issued or transferred in Indonesia, including Bali. These documents include, but are not limited to, deeds, mortgages, leases, bills of exchange and other similar instruments. In Bali, the tax rate for DST is a flat rate of IDR 10,000 ($0.70) and it is the responsibility of the obligated party to pay the tax. DST is an essential part of property transactions and other legal agreements, and it's important for individuals to be aware of this tax and its implications when undertaking such transactions.
Make sure you allow enough time to research these taxes as well.
Bali’s Legal Fees
Legal fees are an integral part of property transactions in Bali.
Transactions conducted through land officials, appointed by the Head of the National Land Office or a local District Head, incur a 1% fee based on the value of the property.
Notaries also play an important role and charge a percentage of the transaction costs, usually between 0.5% and 1.5%.
In addition, the seller is generally responsible for paying agent's fees, which usually amount to around 5% of the transaction value.
All of these fees are important to consider for all parties involved in property transactions, as they affect the overall cost and financial planning. Understanding the breakdown of legal and conveyancing fees is essential for property owners and buyers to effectively manage the financial aspects of property transactions in Bali.
Calculating Taxes & Drawing Conclusions
Let's sum up the above.
The property tax landscape in Bali is multi-faceted and includes various taxes such as:
- Land and Building Tax (Pajak Bumi dan Bangunan, or the PBB tax)
- Value Added Tax (PPN)
- Luxury Tax (Pajak Penjualan atas Barang Berkualitas Tinggi, or PBBT)
- Luxury Sales Tax (PPnBM)
- Capital Gains Tax
- Construction Tax
- Property Transfer Tax (Bea Perolehan Hak Atas Tanah dan Bangunan/BPHTB)
- Rental Income Tax (Personal Income Tax, Corporate Income Tax and Withholding Tax)
- The Name Change Tax
- Documentary Stamp Tax (DST)
Therefore, a full understanding of these taxes is essential to navigate the Bali property market and minimize tax liabilities.
Consultation with a registered tax advisor is highly recommended due to the complexity of the tax system and the potential implications for both local and foreign property owners.
For more information about property marketing or management, you can read our related articles.
And if any questions are left, do not hesitate to contact us! Our team is always ready to provide you with advice on all property matters.
