Who Pays the 11% VAT (PPN) and 5% Transfer Tax (BPHTB) When Buying Property?
Who Pays Taxes When Buying Real Estate in Indonesia: 11% VAT (PPN) and 5% Transfer Tax (BPHTB)
Buying property in Indonesia—whether it's an apartment, land plot, or villa—comes with several mandatory taxes. The two main ones are the Value Added Tax (PPN) and the Tax on the Acquisition of Land and Building Rights (BPHTB). In this article, we’ll break down what these taxes are, who is responsible for paying them, under what conditions, and exactly how much you can expect to pay during a transaction.
Important: Tax rules are the same for both Indonesian citizens and foreign property buyers.
Value Added Tax (PPN) – 11%
What is PPN?
PPN (Pajak Pertambahan Nilai) is Indonesia’s equivalent of VAT, applied to the sale of many goods and services, including newly developed properties sold by registered VAT payers. Since April 1, 2022, the standard rate is 11%.
When is the 11% PPN applied to property purchases?
This VAT applies if the seller is a legal entity registered as a VAT-registered taxpayer (PKP — Pengusaha Kena Pajak). This typically includes:
- Developers;
- Real estate companies engaged in professional sales;
- Organizations registered as VAT payers under Law No. 42/2009.
If you are buying a newly built property from a developer, expect this tax to be part of the transaction.
Are there exemptions from PPN?
Yes. Certain types of residential property may be partially or fully exempt from VAT. For instance, under Ministry of Finance Regulation No. 60/PMK.03/2022, subsidized housing or units priced below a set threshold (e.g., IDR 2 billion, depending on region) may benefit from reduced VAT rates or full exemption. Check with the developer or tax office to confirm eligibility.
Who pays PPN?
The buyer is responsible for paying the 11% PPN if the property is purchased from a PKP entity. The tax amount is generally listed separately or included in the final list price.
What if the seller is a private individual?
If the property is sold by a private owner not registered as a PKP, then PPN is not applicable. This is common in secondary market transactions.
Transfer Tax on Property Rights – BPHTB (5%)
What is BPHTB?
BPHTB (Bea Perolehan Hak atas Tanah dan Bangunan) is a mandatory tax charged upon the legal transfer of ownership rights. Regardless of whether the seller is an individual or a legal entity, this tax is always paid by the buyer.
How is BPHTB calculated?
The base rate is 5% of the taxable amount, which is calculated as follows:
Taxable Amount = Transaction Value – Non-Taxable Threshold (NPOPTKP)
NPOPTKP is determined regionally. For example, in Jakarta, it is IDR 80 million. The formula looks like this:
BPHTB = 5% × (Property Price – IDR 80,000,000)
When and how is BPHTB paid?
Payment must be made before the notarial deed (AJB) is signed. Without proof of payment, the tax office will not register the transfer of ownership with the National Land Agency (BPN).
What Does the Seller Pay When Selling Property in Indonesia?
The seller—whether an individual or a company—is required to pay capital gains tax on the sale of property. This is a flat rate of:
- 2.5% of the transaction value, as stated in the agreement (or the official land value, whichever is higher)
This tax is regulated by Law No. 21/2023 and must be paid by the seller before notarization.
Exceptions for Companies
Companies operating under specific tax schemes (e.g., with turnover below a certain threshold) may be subject to different rules, which must be discussed with tax authorities. In most cases, however, the 2.5% rate applies.
Can the tax be shifted to the buyer?
Sometimes, contracts include clauses where the seller “delegates” the tax to the buyer or raises the price to offset tax liabilities. However, from a legal standpoint, the seller remains responsible for this tax.
How Much Will You Actually Pay? Example Breakdown
Let’s say a foreign buyer purchases a newly built villa from a developer for IDR 3 billion (approximately USD 190,000):
- PPN: 11% × IDR 3 billion = IDR 330 million
- BPHTB: 5% × (IDR 3 billion – IDR 80 million) = IDR 146 million
Total Taxes for the Buyer: IDR 476 million
Seller's Tax: 2.5% × IDR 3 billion = IDR 75 million
This means the buyer faces a tax burden of approximately 15.8% of the property price. It’s a crucial factor when budgeting for the purchase.
Summary Table: Who Pays What When Buying Property in Indonesia
| Tax | Rate | Who Pays | When Paid |
|---|---|---|---|
| PPN — Value Added Tax | 11% | Buyer (if seller is PKP) | When paying for the property or signing the sales agreement |
| BPHTB — Transfer of Rights Tax | 5% of (price – non-taxable threshold) | Buyer | Before signing the notarial deed (AJB) |
| Seller’s Income Tax | 2.5% | Seller | Before registering the transaction |
Frequently Asked Questions (FAQ)
Can foreigners buy property in Indonesia?
Yes, foreigners are allowed to buy property in Indonesia under certain conditions (e.g., specific property rights such as Hak Pakai). Tax rates are the same for all buyers, regardless of nationality.
I’m buying a resale apartment. Do I need to pay PPN?
If the seller is a private individual and not a VAT-registered taxpayer (PKP), then PPN does not apply.
Where can I find official documents on BPHTB rates and calculation methods?
Information is available on the Ministry of Finance’s website or through local tax offices. The main regulation is Government Regulation No. 34 of 2016.
Is the 11% PPN always mandatory?
No. Certain categories of housing—such as subsidized units or properties below a specific price threshold—may be exempt or subject to reduced VAT rates.
Is it mandatory to pay BPHTB before the notary?
Yes. Without BPHTB payment, the notary cannot legally validate the transaction, and ownership cannot be registered with the BPN.
Conclusion
Understanding the tax structure is a crucial step when purchasing real estate in Indonesia. It helps you avoid unexpected costs and prepare adequately. Key points to remember:
- The 11% PPN is paid by the buyer if the property is sold by a developer or other registered legal entity (PKP).
- The 5% BPHTB is also paid by the buyer, regardless of the seller’s status.
- The seller pays 2.5% income tax based on the transaction value.
- Taxes are the same for both locals and foreign buyers.
Always consult a qualified legal advisor or real estate agent to ensure a smooth process and avoid any legal pitfalls.
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