Yearly tax on land, lease and building

[Peterdejager]

Should one pay apart from tax when you buy land or lease it and pay tax on building permits also pay a yearly tax on those three. I get from some informative sources on the net the impression one should pay a yearly tax being assets, but when I ask around people deny it or say I should not bother.
Any knowledge or experience on this?
I did not pay any such yearly taxes and I ve heard one can pay of these at the amnesty tax arrangement.
Cheers Peter

 

[davita]

Hi Peter and welcome to the forum.

In Indonesia there is an annual property tax applied. If you have not previously paid any property tax, or other taxes like income from renting, then the amnesty tax is for you...it will cancel any taxes that you should have previously paid but it requires you to declare the asset and you will be taxed 3% of that value (until end of Dec when it increases).
Thereafter you will need to pay the required annual property tax.

I suggest you apply for amnesty immediately.

 

[Mark]

My understanding is that the tax amnesty has nothing to do with the annual property tax. Instead it is a mechanism to declare and normalize assets that may have been purchased with undeclared / untaxed income. To pay the annual property tax (which is based on the government's assessed value - NJOP), you should go to the Pemerintah Kabupaten Dinas Pendapatan (government revenue office) in the region where the property is located. They can tell you the amount of the arrears, along with the fine for paying late (denda). In Gianyar, the property tax amount is .1% of the NJOP value of the property and late fees range from 10% of the amount due upwards, depending on the number of years outstanding. Overall, the amounts are pretty small. We pay about Rp.120K annually for 50 are of freehold land.

 

[davita]

My understanding is that the tax amnesty has nothing to do with the annual property tax. Instead it is a mechanism to declare and normalize assets that may have been purchased with undeclared / untaxed income. To pay the annual property tax (which is based on the government's assessed value - NJOP), you should go to the Pemerintah Kabupaten Dinas Pendapatan (government revenue office) in the region where the property is located. They can tell you the amount of the arrears, along with the fine for paying late (denda). In Gianyar, the property tax amount is .1% of the NJOP value of the property and late fees range from 10% of the amount due upwards, depending on the number of years outstanding. Overall, the amounts are pretty small. We pay about Rp.120K annually for 50 are of freehold land.

I agree the original objective of the amnesty was to have big amounts of assets, which resided in banks outside of RI, to be repatriated....but the amnesty HAS morphed into anyone with assets/income in RI which should have been taxed...including property taxes. These can be now declared and 3% of value is all that is needed to pay.
I also agree that property taxes in themselves are small but, added to any fines that may apply and any income that may not have been declared, the 3% amnesty cost will likely be the best way to avoid problems.
It is up to the OP to decide which is the easiest/cheapest way to avoid being caught due to non-compliance in the first place.
My previous post suggested declaring and requesting amnesty may be that way as most Indonesians are doing the same...which is why the Gov't is trying to suggest its success.....ignoring the original plan which, so far, has been a failure.

 

[Mark]

davita, the tax amnesty law is a law, it should not 'morph' into anything unless amended! It does not cover annual property taxes, which have nothing to do with income, undeclared or otherwise. Land tax is simply a tax on the land - irrespective of who owns it or how or when it was acquired. There has been loads of hysteria and misinformation around the tax amnesty but the fact is that it is a simple mechanism for Indonesia tax residents to normalize (clean) assets acquired through income that should have been declared and taxed in the past. Also, as it is not relevant to persons who are not Indonesia tax resident, it is unclear whether it would apply to the OP (is he tax resident or not?)

 

[davita]

Well I disagree and can tell you many Indonesians, and those holding nominee titles, are filling the notary offices here in Bali applying for amnesty because some lands have never paid property taxes....for many years.

I'm one who has two nominees for property in Bali and Jakarta. We went to the notary but do not require amnesty as all property taxes and declaration of assets were complete and the nominees, as relatives, derived no income from those assets.

If the OP agrees with you then I'd be happy if he posts when he has completed his payment of back property taxes.

 

[Mark]

This thread highlights the confusion around the tax amnesty, which was designed for the big fish hiding money offshore and instead ended up panicking ma and pa and the rest of the small fry ordinary Indonesians. The attached briefing from PWC clearly states that the scope of the tax amnesty is limited to income tax, value added tax and luxury goods sales tax. https://www.pwc.com/id/en/taxflash/assets/english/2016/taxflash-2016-09.pdf

The property, or land tax, is an obligation attached to all private land and is totally unrelated to income, VAT or luxury goods sales tax. It applies even if the owner has never earned a penny of income in their life. If you fail to pay the land tax, it will continue to accrue as a charge on the land, with penalties, until such time as the owner wants to do something with the land (get an IMB, sell it, etc.) at which point the tax and penalties must be paid before the government will process the requested paperwork. In theory, if the government really wanted to collect, it could get probably request a court order for the sale of the land to satisfy the arrears, but given the minuscule amount of the tax (0.1% of the below market NJOP value per annum) I can't see this ever happening.

Yes, OP, please let us know how it goes. I went to the revenue office myself last month when the wife paid the annual taxes (and small penalty from 2015) and the process took all of 5 minutes.

 

[davita]

It appears, from your link, that you are correct and all those people who are being advised by notaries to report their property assets, and pay amnesty, are going to be rightly pissed-off when all the outstanding property taxes are also due....now they have reported the ownership of the asset.

It has been a requirement to report on one's SPT all assets...but many never do that.

When we visited the notary with our nominee, to discuss the matter, we were advised we didn't need to do anything as we showed all property tax receipts and our nominee recorded the property on his SPT over 4 years ago. We wanted to preserve his situation as he's a ranking gov't official.

 

[Markit]

I'm afraid I'm one of those Emu's that thought if he kept his head in the sand it would all go away.

It hasn't surprise, surprise and I would appreciate any advise this illustrious forum can give me in my moment of need.

I built on this land 7 years ago and pain(d) no tax on anything until last year when it was all settled. Where upon my nominee says he got this receipt:

This seems to be an awful lot in consideration of Mark's 0.1% above!!!

All good and well but my real estate lady then came along with this reply:
[FONT=&amp]
I note the tax is for land only and no building so the tax was not mutated to cover land and build. You will need to get that checked as when construction was completed then construction tax should have been paid and a mutation on the PBB

To which I (and my nominee?) seem to be in the dark. Any advise or ideas?

Further to my situation; my nominee's tax advisor has now said I need to pay the 3% amnesty tax before December but my understanding of this tax was similar to what has been stated above i.e. if the land/house was within the bounds of possible ownership from my nominee (he's a GM for a major hotel and not just some driver or pool boy) then there should really be no question of it's "rightness"?

It was pointed out by the accountant that this is because I'm trying to sell - and that there would be a conflict should the sale happen (which I doubt)??

Any clarity would be gladly embraced or alternatively a source (paid) of VALID information/advice - there are sooooo sooo many conflicting stories on this subject and the beating of vulture wings is very loud.

Markit
[/FONT]

 

[DenpasarHouse]

This seems to be an awful lot in consideration of Mark's 0.1% above!!!

Correct me if I'm wrong, but they didn't follow their own formula. The total only makes sense if they've multiplied the "Luas Bumi" by the "NJOP Bumi". I assume that the "NJOP Bumi" is the price per are. Do you really own 1000 are?

 

[Markit]

20 are

 

[Mark]

20 are

According to the tax assessment the land is 10are. Do you have two contiguous parcels of land of 10are each?

 

[Markit]

Yes and 2 receipts, well spotted.

 

[DenpasarHouse]

20 are

Right. So they don't use the unit ARE on the form but if it is ARE then the "Luas Bumi" should have read 20 and your total should have been:

((20 x 36,000,000) x 0.001) + 720,000 = Rp. 1,440,000

This should obviously be more because they haven't added ("Luas Bangunan" x "NJOP Bangunan") which are incorrectly set to zero. I've no idea what the NJOPTKP is.

Still, you should be in for a big refund after it's correctly calculated.

I agree with Mark above, you shouldn't conflate this problem with your land tax with the tax amnesty. They're two different issues.

Whether or not you pay the Tax Amnesty is probably dependant on the likelihood of your nominee getting audited by the tax department. Even if he's no pool boy, if he gets audited he's still going to have to justify where the money came from to buy the property.

Also, he might have to justify why he's letting a foreigner stay there rent free.

 

[Markit]

Right. So they don't use the unit ARE on the form but if it is ARE then the "Luas Bumi" should have read 20 and your total should have been:

((20 x 36,000,000) x 0.001) + 720,000 = Rp. 1,440,000

This should obviously be more because they haven't added ("Luas Bangunan" x "NJOP Bangunan") which are incorrectly set to zero. I've no idea what the NJOPTKP is.

Still, you should be in for a big refund after it's correctly calculated.

I agree with Mark above, you shouldn't conflate this problem with your land tax with the tax amnesty. They're two different issues.

Whether or not you pay the Tax Amnesty is probably dependant on the likelihood of your nominee getting audited by the tax department. Even if he's no pool boy, if he gets audited he's still going to have to justify where the money came from to buy the property.

Also, he might have to justify why he's letting a foreigner stay there rent free.

Thank you Dhouse (Dr.?) I'm going to dig into this further - do you (or anyone else) know of a reputable 3rd party that would do the calcs for me on this and that are dependable? Big ask, I know.

- - - Updated - - -

I'm still hoping for a reply from Mark on this ... ?

 

[Mark]

I'm afraid I'm one of those Emu's that thought if he kept his head in the sand it would all go away.

It hasn't surprise, surprise and I would appreciate any advise this illustrious forum can give me in my moment of need.

I built on this land 7 years ago and pain(d) no tax on anything until last year when it was all settled. Where upon my nominee says he got this receipt: View attachment 2832

This seems to be an awful lot in consideration of Mark's 0.1% above!!!

On its face, this statement seems in order. This 10 are of land has an NJOP value of Rp 36 juta, and attracts an annual land tax of 0.1% or Rp. 36K. Since the tax wasn’t paid when it was due (30 Sept), there is a fine (denda) of Rp 720. Assume you have a similar bill for the second 10 are piece?

All good and well but my real estate lady then came along with this reply:
[FONT=&amp]
I note the tax is for land only and no building so the tax was not mutated to cover land and build. You will need to get that checked as when construction was completed then construction tax should have been paid and a mutation on the PBB

To which I (and my nominee?) seem to be in the dark. Any advise or ideas?
[/FONT]
[FONT=&amp] The real estate lady is right. Since you have now added a building to the property, you will need a mutasi (modification) to the tax records as the value of the property (and corresponding annual property tax) will have increased due to the building. This is a routine matter that can be sorted out at the tax office and should be done prior to the sale. Indeed your buyer will probably insist on it so better to just get it handled to avoid delaying the sale process.

Further to my situation; my nominee's tax advisor has now said I need to pay the 3% amnesty tax before December but my understanding of this tax was similar to what has been stated above i.e. if the land/house was within the bounds of possible ownership from my nominee (he's a GM for a major hotel and not just some driver or pool boy) then there should really be no question of it's "rightness"?
[/FONT]
[FONT=&amp]This issue is a bit more tricky, as it has to do with your nominee's tax situation, and not the land per se. According to the tax records, your nominee owns a piece of land (or two) in Karangasem and the authorities may want to know at some point where the money came from for this purchase and whether the nominee ever paid tax on this money. If he did not (and of course he did not), then the tax amnesty payment cleans the matter with no further enquiry. Yes, the money to purchase the land was yours, but in effect you gave it to him to purchase the land in his name. In the eyes of the taxman, this is a gift that is taxable to the recipient. The amnesty payment makes the resulting liability go away.

It was pointed out by the accountant that this is because I'm trying to sell - and that there would be a conflict should the sale happen (which I doubt)??
[/FONT]
[FONT=&amp] Your doubt seems well founded. As it is a personal tax matter, I believe the only way this issue could hold up the sale is if your nominee refuses to sign the sale and purchase agreement unless you pay the amnesty amount.

Any clarity would be gladly embraced or alternatively a source (paid) of VALID information/advice - there are sooooo sooo many conflicting stories on this subject and the beating of vulture wings is very loud.

Markit
[/FONT]

 

[Markit]

Thank you for your clear and considered reply and I will need a bit to digest the part about tax amnesty.

In reference to the land tax you said:
This seems to be an awful lot in consideration of Mark's 0.1% above!!!

On its face, this statement seems in order. This 10 are of land has an NJOP value of Rp 36 juta, and attracts an annual land tax of 0.1% or Rp. 36K. Since the tax wasn’t paid when it was due (30 Sept), there is a fine (denda) of Rp 720. Assume you have a similar bill for the second 10 are piece?

I'm not clear where the land value sum of 36 juta comes from? I paid 36 juta tax please see receipt!

 

[Mark]

Thank you for your clear and considered reply and I will need a bit to digest the part about tax amnesty.

In reference to the land tax you said:
This seems to be an awful lot in consideration of Mark's 0.1% above!!!

On its face, this statement seems in order. This 10 are of land has an NJOP value of Rp 36 juta, and attracts an annual land tax of 0.1% or Rp. 36K. Since the tax wasn’t paid when it was due (30 Sept), there is a fine (denda) of Rp 720. Assume you have a similar bill for the second 10 are piece?

I'm not clear where the land value sum of 36 juta comes from? I paid 36 juta tax please see receipt!

The 36 juta value is the government's assessed value of the land, not necessarily its market value. You could imagine the uproar if all land was taxed at market value - few Balinese could afford to pay. In any event, according to the receipt you paid Rp.36,750 tax (jumlah bayar), so I'm confused why you say you paid 36 juta tax...

 

[Markit]

The 36 juta value is the government's assessed value of the land, not necessarily its market value. You could imagine the uproar if all land was taxed at market value - few Balinese could afford to pay. In any event, according to the receipt you paid Rp.36,750 tax (jumlah bayar), so I'm confused why you say you paid 36 juta tax...

Clearly I'm going to have to dig into this more deeply...

Again thank you!

 

[DenpasarHouse]

Scratch all that, just see Mark's posts.