This article is developed to support the market knowledge for the financial sector, as well as push the growth of investments in the real estate sector, provide special provision on the imposition of Income Tax on income from the transfer of real estate under the Collective-Investment Contract scheme with the Government Regulation.
Tax Subject
Article 4(2) Income Tax is imposed on individuals or corporations that receive or obtain income from the transfer of real estate rights to a Special Purpose Company (SPC) or Collective-Investment Contract (KIK) in certain KIK schemes.
Tax Withholder
Article 4(2) Income Tax must be paid independently by the Taxpayer that receives or obtains income from the transfer of real estate rights.
Tax Object
Article 4(2) Income Tax is imposed on income received or obtained by individuals or corporations from the real estate rights transfer to an SPC and KIK in certain KIK schemes.
A Collective-Investment Contract is a Collective-Investment Contract following the provision that regulates the Capital Market. Certain KIK scheme is an investment scheme in the form of KIK with a Real Estate Investment Fund (DIRE/REIT), which is a forum used to collect funds from the investing public to then be invested in Real Estate assets, with or without using SPC.
Real Estate is a physical land and building built on top of the land. Transfer is all rights transfer on real estate with a certain KIK scheme which can be done through several ways, including sale, exchange including ruislag, agreement on transfer of rights, relinquishment of rights, transfer of rights, grant, or other means agreed by both parties.
Special Purpose Company refers to a Limited Liability company of which its shares is owned by a Real Estate Investment Fund (DIRE/REIT) in the form of KIK with a minimum of 99,9% of the paid-up capital, which is made solely for the purpose of DIRE/REIT in the form KIK.
Tax Basis Imposition
The basis imposition for Article 4(2) Income Tax is the gross amount of real estate transfer, which is:
Taxpayers’ whole received or obtained amount from the SPC or KIK as the transfer of real estate transfer in the certain KIK scheme. In this case, the taxpayers does not have any special relationship with the SPC or KIK
Taxpayers’ supposedly whole or received or obtained amount from the SPC or KIK as the transfer of the real estate transfer in certain KIK scheme in the case of Taxpayers not having any special relationship with the SPC or KIK
In the case of the real estate transfer from the Taxpayer to the KIK or SPC is influenced by a special relationship, the gross amount of the transfer value is the whole amount received based on the market value or based on the assessment of an independent appraiser. Special relationships are regulated in Article 18(4) Income Tax Law.
Special relationship between Taxpayers and KIK or SPC can cause the transfer value to become much higher or lower in comparison with the ones that are not affected by special relationship. Thus, the real estate transfer value is the amount that should be received. In the case of Taxpayers not having any special relationship with KIK or SPC, the transfer value is the whole amount received or obtained by the Taxpayer.
Tax Rate
The withheld Article 4(2) Income Tax is rated at 0.5% of the real estate transfer value’s gross amount.
Tax Due Date
Article 4(2) Income Tax on income from the transfer of a real estate in a certain KIK scheme is payable when the payment on the transfer of the real estate to SPC or KIK in a certain KIK scheme is received partially or whole.
Payable taxes is calculated based on each paid amount, including down payment, interests, levy, and other additional payments in relation to the real estate transfer.
Tax Withholding Procedure
Article 4(2) Income Tax payable must be paid independently by Taxpayers, prior to the development of deed, decision, accord, or agreement on the real estate transfer to SPC or KIK in certain KIK schemes is signed by authorized officials.
Authorized officials are officials given the authority to sign a deed, decision, accord, or agreement on the transfer of land and/or building following the provision of the Land Law. Included as authorized officials to sign the deed, decision, accord, or agreement are Notary, Land Deed Official, District Head, or other officials authorized to sign deed, decision, accord, or agreement regarding the transfer of rights to land and/or buildings in accordance with the provision of the Land Law.
Said authorized officials must also file a report regarding the issuance of a deed, decision, accord, or agreement on the land and/or building transfer to the Directorate General of Taxes.
Taxpayers that conduct real estate transfers and is imposed with Income Tax must:
File a tax return to the Tax Office where said Taxpayer is registered regarding the real estate transfer to SPC or KIK in a certain KIK scheme with these complementary documents:
a photocopy of the letter of notification of the effectiveness of the DIRE/REIT registration statement in the form issued and legalized by the Financial Services Authority KIK
notification from the Financial Services Authority that states that said Taxpayer has done a real estate transfer and is doing transactions with SPC or KIK in certain KIK scheme
a stamped letter stating that said Taxpayer has done a real estate transfer and is doing transactions with SPC or KIK in a certain KIK scheme
a photocopy of the Tax Payment Slip on income from the real estate transfer to SPC or KIK in certain KIK scheme, and
Receive a fiscal notification letter from the Tax Office where said Taxpayer is registered
The authorized official can only sign the deed, decision, accord, or agreement on the real estate transfer if it is proven that:
Income Tax has been paid by providing a photocopy of the Tax Payment Slip,
The responsibility has been fulfilled by submitting a photocopy of the letter and/or document as well as a photocopy of proof of receipt of the letter from the Tax Office where the Taxpayer is concerned
Tax Payment Procedure
The Income Tax Withholder must pay the Income Tax to the Tax Office or banks appointed by the Ministry of Finance, no later than the 15th (fifteenth) day of the following month after the month the tax withholding is made.
The payment is made using a Tax Payment Slip with the tax account code 411128 for Article 4(2) Income Tax and the payment code 425 is for real estate transfer in certain KIK schemes.
If the tax payment due date coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the payment can be made on the next working day.
Tax Filing Procedure
Taxpayers that pay the payable Article 4(2) Income tax on real estate transfer in certain KIK schemes independently must report the income received or obtained and the paid Income Tax in a Tax Period to:
Tax Office where the work zone includes the real estate location, for Taxpayers with main business in real estate transfer
Tax Office where Taxpayers file the administrative Annual Income Tax Return, for Taxpayers other than the Taxpayers with main business in real estate transfer
The filing is done through the Unification Income Tax Returns and the notification letter following the format in the Ministry of Finance Regulation Number 37/PMK.03/2017 Attachment regarding the real estate transfer to SPC or KIK in certain KIK schemes, no later than the 20th (twentieth) day after the tax period ends.
If the filing due date of the Article 4(2) Final Income Tax return coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the filing can be made on the next working day.
Individuals who receive income from the transfer of real estate in certain KIK schemes that has been withheld with Article 4(2) Income Tax must report the income and the withheld Article 4(2) Income Tax on their Annual Individual Income Tax Returns by 3 (three) months after the end of the Tax Year.
Corporate Taxpayers who receive income from the transfer of real estate in certain KIK scheme which has been withheld with Article 4(2) Income Tax must report the income and the withheld Article 4(2) Income Tax on Attachment IV of the Corporate Taxpayers Annual Tax Returns by 4 (four) months after the end of the Tax Year.
Legal Basis:
Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 7 Year 2021 regarding Harmonization of Tax Regulations
The Government Regulations Number 40 Year 2016 regarding Income Tax on Income from Real Estate Transfer under Collective-Investment Contract Schemes
The Ministry of Finance Regulations Number 37/PMK.03/2017 regarding Procedures of Payment and Filing of Income Tax on Income from Real Estate Transfer under Certain Collective-Investment Contract Schemes
The Directorate General of Taxes Regulations Number PER - 08/PJ/2022 regarding Procedure for The Examination of Evidence of the Fulfillment of Obligation to Pay Income Tax on Income from The Transfer of Right to Land and/or Building, and Land and/or Building Sale and Purchase Commitment Agreement Along with the Amendments
Contact Us
Marketing Communications at MIB
📞 +62 819 1188 0077
MIB is a group of certified and registered professionals in Indonesia, where each member has a unique set of skills and expertise. Each member is independent, compliant with our standards, and responsible for the works and services provided to the clients.
Comments