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Developers oppose revision of property tax regulation
Publicly listed developers have openly opposed the governmentâs plan to revise a property tax regulation, which according to them would result in a sharp increase in taxes on both landed houses and apartment purchases
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Publicly listed developers have openly opposed the government's plan to revise a property tax regulation, which according to them would result in a sharp increase in taxes on both landed houses and apartment purchases.
Pakuwon Jati finance director Minarto Basuki said that his company hoped the government would review the plan, saying that existing property taxes already hamper property transactions.
The additional taxes, he said, would lead to end-users experiencing difficulty in purchasing property as the amount of the taxes they would have to pay would rise significantly.
'The taxes, once carried out, will of course affect our business, at least in the short term. We really hope the government rethinks the plan as there are already quite a lot of taxes imposed on property,' Minarto told The Jakarta Post.
The revision will also include the reduction of the price limit for houses and apartments subject to 5 percent income tax from more than Rp 10 billion or more than 500 square meters and from more than Rp 10 billion (US$770,000) or more than 400 sqm, respectively, at present to Rp 2 billion, each.
The change will also include the removal of the taxable value of property (NJOP) and the reduction of the price limit houses and apartments, which are subject to the 20 percent sales tax on luxury goods.
At present, the luxury tax is imposed on property transactions for apartments above 150 sqm and worth more than Rp 4 million per sqm also landed house more than 400 sqm and worth more than Rp 4 million per sqm.
According to Sindi Paramita, a property analyst with Bank Mandiri, if the reduction of the price limit for the income tax was approved, any purchases of landed houses of more than Rp 2 billion and 500 sqm or apartments more than Rp 2 billion and 400 sqm would be subject to a total transaction tax of about 40 percent. This high percentage includes the value added tax of 10 percent, an income tax of 5 percent, a luxury tax of 20 percent and a property transfer fee of 5 percent
Agung Podomoro Land corporate secretary Justini Omas said the policy would burden the property industry.
She, instead, questioned how the government defined 'luxury' in the property business, saying that it might lead to confusion given how property prices were already high.
'Property prices continue to rise, identifying Rp 2 billion-worth property as luxury is just like defining all property as luxury,' she said.
Theresia Rustandi, vice chairwoman of property association Real Estate Indonesia (REI), said that the association had met with the Finance Ministry several times to discuss the possible tax revision, arguing that it might extend the industrial slowdown the sector has been facing since 2014.
Theresia, who also serves as corporate secretary of Intiland, said that the Rp 2 billion price limit was too low, given that a subsidized apartment in Jakarta was priced at Rp 9 million per sqm on average.
'There are already many regulations applied on the property sector, including the LTV [loan-to-value]. If the plan is to boost tax income, the government should target businesses that have yet obliged to pay taxes,' she said.
Despite the tax-revision plan, several developers said that they would maintain their initial marketing targets. Among the companies are Bumi Serpong Damai, which ' according to corporate secretary Hermawan Wijaya ' would maintain its target at Rp 7.5 trillion this year regardless.
'JP/ Anggi M. Lubis
