In an effort to boost economic growth across Indonesia by stimulating public purchasing power within the housing sector, the government has decided to offer a range of tax incentives for value-added tax (“VAT”) on transfers of landed houses (rumah tapak) and units in apartment buildings (rumah susun) (collectively referred to as “Properties”) until December 2024.[1] In order to officially implement this new tax incentive, the Minister of Finance (“Minister”) has issued Regulation No. 61 of 2024 on Additional VAT Incentives for Transfers of Property  Borne by the Government (Pajak Pertambahan Nilai yang Ditanggung Pemerintah – “PPN DTP”) for the 2024 Fiscal Year (“Regulation 61/2024”), which came into effect on 19 September 2024.[2]

Similar PPN DTP facilities for the November 2023 to June 2024 period were previously outlined under Regulation of the Minister No. 7 of 2024 on VAT Incentives for Transfers of Landed Houses and Units in Apartment Buildings Borne by the Government. Now, through the issuance of Regulation 61/2024, these PPN DTP facilities have been reinstated for the September to December 2024 period.[3] In addition to the extension of the facilities, Regulation 61/2023 has also raised the PPN DTP rate for the September to December 2024 period from 50% to 100%.[4]

In essence, Regulation 61/2024 stipulates that PPN DTP will be granted for landed houses (i.e. residential buildings or rowhouses, including residential buildings that are partially used as shops or offices) and apartment units (specifically functioning residential units).[5] Against this backdrop, this edition of Indonesian Legal Brief (ILB) summarizes the new provisions that have been introduced under Regulation 61/2024, specifically as they relate to the following matters:

1. General Requirements;
2. Eligible PPN DTP Receivers; and
3. PPN DTP Exemptions.

General Requirements

Regulation 61/2024 clarifies that the PPN DTP incentive applies to Property transfers at the time of signing of sale and purchase deeds prepared by land deed officials or fully paid sale and purchase agreements that are signed before notaries.[6] Furthermore, all such transfers must be completed between 1 September 2024 and 31 December 2024  and must be followed by actual handovers of the relevant rights to Properties, as documented during this period in official handover reports.[7]

In addition, Properties must also meet the following criteria in order to be classified as eligible to enjoy the PPN DTP facility:[8]

1. Must have a maximum selling price of Rp. 5 billion; and
2. Must be new and ready to occupy (i.e. as identified by a house identification code and as transferred by the seller for the first time without any prior transfers).

In the event that Properties were purchased through down payment or instalment schemes prior to the issuance of Regulation 61/2024, then said Properties may still be eligible to enjoy the PPN DTP incentive provided that the following conditions are met:[9]

1. The relevant downpayment or the first instalment must be paid by 1 September 2024 at the earliest; and

Must fulfil the requirements for the securing of the PPN DTP facility between 1 September 2024 and 31 December 2024.

Regulation 61/2024 clarifies that the granted PPN DTP will amount to 100% of VAT owed on a taxable base of up to Rp. 2 billion, with a maximum sale price of Rp. 5 billion.[10] This PPN DTP will apply during the September to December 2024 tax period and will cover VAT owed between 1 September and 30 September 2024.[11]

Furthermore, the relevant sellers must issue tax invoices in accordance with applicable law and submit a PPN DTP realization report on the date that a given Property is transferred.[12] Any failure to comply with these obligations will result in the imposition of administrative sanctions in accordance with applicable Laws and Regulations on taxes.[13]

It should also be noted that reports and corrections of VAT notifications for the September to December 2024 period can be used as realization reports.[14]

Eligible PPN DTP Receivers

Under Regulation 61/2024, the PPN DTP facility may only be utilized by single individuals for the acquisition of one type of Property (“Receiver”).[15] Receivers must meet one of the following criteria:[16]

1. Must be an Indonesian citizen who has secured a tax identification number [nomor pokok wajib pajak – “NPWP”]) or a population identification number (nomor induk kependudukan/NIK); or
2. Must be a foreign citizen who has secured an NPWP, provided that they meet the legal requirements for Property ownership by foreign citizens, as applicable under law.

It should also be noted that any individuals who utilized the PPN DTP incentive during the previous period may still benefit from this facility for purchases of other Properties.[17] However, purchases of Properties that were completed prior to 1 September 2024 or that have been canceled will not be eligible to enjoy the PPN DTP facility.[18]

PPN DTP Exemptions

The VAT will not be covered by the government, in several circumstances, including:[19]

1. The object transferred does not meet the criteria for Properties, as defined under Regulation 61/2024;
2. Down payments or first instalment payments were completed before 1 September 2024;
3. The Property transfers occurred before 1 September 2024 or after 31 December 2024;
4. The transaction in question involves more than one type of Property being acquired by a single individual;
5. A Property is transferred within one year of its initial transfer; and so forth.

In such cases, the Heads of Tax Offices, on behalf of the Director-General of Taxes, will be authorized to collect the relevant VAT from the said individuals in accordance with applicable Laws and Regulations, provided that the available data and/or information indicates any of the above-mentioned conditions.[20]

Key Takeaways

Any individual who meets the criteria to secure the PPN DTP incentive as a Receiver should carefully review the applicable requirements and criteria, as outlined above. However, it is important to note that any Properties that have already received VAT exemptions under applicable law cannot benefit further from the PPN DTP incentive.[21] In addition, Receivers must be mindful of the tax period, Property transfer period and Property ownership transfer period in order to avoid the imposition of administrative sanctions and/or VAT liabilities due to non-compliance.

Source: hukumonline.com