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Govt extends VAT cut on new homes but reduces amount
The government has extended through June next year an incentive for property purchases to spur the construction industry but is undecided on a continued tax cut for car purchases.
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Despite a value added tax (VAT) cut in place since March, the housing industry has yet to recover. (kompas.com/file)
T
he government has extended a period of reduced value added tax (VAT) on the purchase of new homes to the end of June 2022 but has halved the amount of the discount.
Coordinating Economic Minister Airlangga Hartarto told the media on Thursday that a 50 percent VAT cut would apply to properties priced at less than Rp 2 billion (US$140,242), while a 25 percent tax cut would be applicable for homes priced between Rp 2 billion and Rp 5 billion.
“The property tax cut has been approved by the President," he said. “It can also be applied to new housing that is still under construction.”
Previously, the government had extended the incentive from September to December. The earlier regulation had waived VAT on houses and dual-purpose properties, namely shop-houses and office-houses, priced below Rp 2 billion, while it slashed by half VAT on homes priced between Rp 2 billion and Rp 5 billion.
Read also: Govt extends VAT cuts for new homes to year-end
The housing VAT cut first came into effect in March 2021 to stimulate household spending, which accounts for more than 55 percent of Indonesia’s economy. After contracting 4.05 percent year-on-year (yoy) in the third quarter of last year, household spending booked yoy growth of 1.03 percent in the third quarter of 2021.
Finance Minister Sri Mulyani said on Friday the extended tax incentive for new homes was aimed at supporting the property sector, which was still lagging behind in the overall economic recovery.
