EN 
IN
The Review of Property Income Taxes
29/06/2020 Views : 212
I Made Sukartha
Property
transaction sarefascinating to be discussed, not only due to their often
substantial worth, but these transactions of properties also receive attention
specifically from the taxation authority of Indonesia (Directorate General of
Taxes). In 2013, there is an increase in the value of mortgages or KPA of approximately
22% per year. Conversely, tax revenue from the property sector is only 1.3-1.5%
per year out of the total national tax revenue.[1]
Then it can be concluded that ideally,there is a substantial potential revenue
from the property sector that remained unearthed.
Despite
its promise, a Bank of Indonesia survey for the third quarter of 2016 revealsa sluggish
trend in the property transaction. The decline wasreflected by a decrease in
the index price of the property commercially by 0.19%. The cause may beattributable
to the soaring supply of properties commercially in the market.[2]
Upon
realisation of the condition, the Indonesian government launched several taxation
stimuli policy in the form tax amnesty on July 2016 and the most recent Government
Regulation number 34 ( here in afterreferred to as "PP 34") in August
2016.
The
article is, in particular, will discuss the changes in the provisions contained
in Regulation number 34.
Tax
aspects of property transactions
Tax
obligations that arise in property transfer ( land and/or building )
transactions can generally be explained as follows :
for
the buyer is obliged to pay off state government levy (BPHTB).
Please
note that PP 34 This This picture illustrates that there are three aspects of
the taxliability that would arise as a result of the transfer of the property.
The seller will be obligated to pay final income tax and also the Value Added Tax
( if considered taxable businessman/PKP), while
[1]http://www.pajak.go.id/content/news/dialog-khusus-kpp-madya-sidoarjo-aspek-perpajakan-sektor-propertib
Binding Agreement of Sale and Purchase (PPJB) as Tax Object
It
is common knowledge the Tax Law mandates every income that isresulting from the
transfer of the right to property ( land and/or buildings ) as contained in
document Deed of
exclusively
discussesthe final Tax on the transfer of property ( land and/or buildings ).
Sale
and Purchase (AJB) subject to final tax income ( here in after called " Final
tax").
In
general, the payment of Final income tax done simultaneously when the Deed of
Sale Buy (AJB) is made. However, the PP34 introduced a new point[3]
which encompasses that not onlythe financial information that is contained in
the Deed of Sale Buy but every penny of income that is paid out since tied
Binding Agreements to Sell or Buy (CSPA) is the object Taxation and already
owed Final income tax.
Enforcement
on this ruling is also ruled in PP 34[4],
which requires that authorised officials to copy in every deed, decision,
agreement, or the minutes of the auction on the transfer of the right to land
and/or buildings that are made to the Directorate General of Taxes in the form
of monthly reports.
Sellers
Responsibility
PP
34 confirms if there is a change in the name of the buyer in a transaction
inthe PPJB.
In
a double role, the seller via PP 34 is responsible for overseeing the repayment
of Final Income tax before signing the changes done to the PPJB. PP 34 onlyallows
the signing of change to PPJB if Income Final payable by the buyer who listed
his name ( before the change CSPA) has been deposited into the state treasury. Although
there areno further sanctions if obligations not met but related parties should
note it.
Pruning Tax Rates
In addition to the administrative change,
the government also perform trimming to the rates of Final Incometax. The new
rate imposed by the government through the PP 34 can be differentiated into
three,namely :
(1 (1) If
the transactions carried out by two parties who are both in the private sector
with an object other than a small dwelling (RS) or multiple small dwelling
(RSS) then the rate of Final income tax that is used is 2.5%.
(2 (2) If
the transaction carried out by two parties who are both in the private sector
with the object in the form of RS or the RSS and the seller is in property
business, then the government provide relief on rates by 1%.
(3 (3) If
the transaction is carried by a government entity, BUMN BUMD, a special rate of
0% will be applied.[5]
[3]See Art 1 Paragraph 1 (b) PP No 34 (2016)
[4]See Art 3 Paragraph
6 PP No 34 (2016)
[5]See Art 2 Paragraph 1(c) PP No 34 (2016)
Rates
of Final income taxin PP 34 in comparison with the previous regulations of PP
71, can be seen as follows :
|
Statement |
PP 71 (2008) |
PP 34 (2016)
|
|
To private Sector RS
and RSS objects |
1% |
1% |
|
To
private Sector, in addition to RS and RSS objects |
5% |
2,5% |
|
To the Government |
Official
Decision |
0% |
Based
on the table above it can be concluded that in general, the Final Income tax
rates fell by 50% from the previous tariffs. With the decline in rates of Final
Incometax, it is expected that the interest of the public in investing in property
will further increase, and contributions of Final Income tax will also
increase.
The
rates reduction of Final income tax is in line with the taxation concept of developed
countries in switching to consumption tax (sales tax or value-added Tax) by lowering
the rate of income tax.
The
decline in tax rates is expected to increase the taxpayer transparency in
disclosing the real value of the property transaction; however, it is also
possible that this practice would give rise to value-added Tax (PPN) if the
value of the transfer exceeds 4.8 billion rupiahs a year. It requires taxpayers
to levy PPN at 10% of the transactional value of sales.
Basis of Tax Imposition
In
the case of transferring property rights to the government, exclusive
discretion is given in determining the value of the transfer entirely to the
authorised official.[7]
Other
thanthe transfer of rights to the government, related parties should carefully
determine whether the transfer is done by a party who has a special relationship
(related parties) or not. It is because if the parties that transact under
special relationship, then the value of the transfer of rights can be corrected
by referring to the market price or independent appraisal. Meanwhile, if a
special relationship does not influence the parties then the value of the
transfer of rights will apply to the actual or obtained value, as evidenced by
certificates are issued by the official creator of the deed.
In
short, if the buyer and seller are related by blood (for example parents-children,
in-laws, siblings, or brother and sister through marriage) and / or have a business
relationship (stock and non- stock) in the same company, then both parties need
to base the transaction value of the market (market value). Meanwhile, if the
transfer of property rights is done through an auction process, the transfer
value is per the minutes of the auction.
Final Tax Realisation and Payments
All
this time, the moment when the final income tax is due for the property
transaction, and the amount of payment often raises a question mark. Are taxes
based on the proportional amountunder termpayments or the total value of the whole
amount received by the taxpayer used as the base of calculation?
The
PP 34[8]
confirmed that the payment of Final income tax is proportionate or in other
words, PP 34 take into consideration the financial capability of the taxpayer
(Ability to pay).
Final
income taxis payable when down payment or instalment is made, and the basis of
payment is proportional based on the amount paid at the time outstanding.
However, it should be noted that other than the transfer price, the basis of
payment includes every payment of interest, fees and other additional payments done
by the buyer.
Further
tax income payable, shall be paid at the latest by 15 months following the
first receipt of payment or instalment. Payment of tax income on the transfer
of rights over land and / or buildings are made to parties other than the
government, shall be done by the private or entities who receive income, before
the deed, decision, and the agreement signed by authorised officials.
Period applicable
This Government Regulation No. 34 of
2016 comes into force 30 days after promulgation, in other words on September
9, 2016, it applies simultaneously in all regions of the Republic of Indonesia.
POINTS
•
PP 34 confirms that
since its founding, PPJB is the object of Final PPh ;
•
The seller must be prudent
in examining tax payments in the event of a change in PPJB;
• That the rates of Final income tax, in general, dropped into 2.5% but there are also tariffs especially by 1% for modest housing and 0% when transacting with
the government;
•
That the Final income
tax payable wheneach payment made and the amount proportional to payments made.