Moody's Investors Service says that demand recovery will be uneven across Indonesian property segments, although cash flow is expected to broadly improve from low levels in 2020 - Photo: Special

JAKARTA (TheInsiderStories) – Indonesia’s government lifted the price limit of luxury residence that’s being imposed with 20 percent sales tax, by more than double. The revision, according to the official, is expected to boost the property sector by increasing its competitiveness.

Indonesia Finance Minister Sri Mulyani Indrawati has signed the regulation, June 10. It is stipulated that types of taxable goods classified as luxurious beside a vehicle that will be imposed with 20 percent tariff is for Rp30 billion sales price and more.

“The regulation will start being implemented on the legalization date,” said Law and Human Rights Ministry’s Director General of Legislation, Widodo Ekatjahjana.

In the previous regulation, namely Minister of Finance Regulation Number 90 the Year 2015 concerning Certain Corporate Taxpayers as Income Tax Collectors from Buyers on Sales of Very Luxurious Items and PMK Number 35 of 2017 concerning Types of Luxury Taxable Goods Other Than Motorized Vehicles Subject to Sales Tax on Luxury Goods.

In the provisions of decree released in 2015, the tax object is the sale of a house with a selling price of more than Rp5 billion or a building area of ​​more than 400 square meters and an apartment with a selling price of more than Rp5 billion or a building area of ​​more than 150 square meters.

Furthermore, there were different tariff limit for each type of residential. Non-strata title house and townhouse that’s being imposed by luxury goods tariff is for the Rp20 billion price and more. Meanwhile, strata title apartment, condominium, and townhouse that was being imposed are for Rp10 billion price.

On that time, the government said goods that are very luxurious actually are naturally subject to high taxes. However, for the property sector, there are considerations to maintain industrial growth and the impact of the multiplier or multiplier effect. Luxury home sales are not large in quantity. However, profits generated in one transaction can be higher than lower or middle-class home sales.

Bank Indonesia‘ residential property survey in the first quarter showed a weak position. The residential sales were only increasing by 0.05 percent year-on-year, supported by small-type house that grew by 6.54 percent. Meanwhile, sales of the medium-type house fell by 5.5 percent, and the big-type house slumped deeper by 19.38 percent.

But on quarterly, the property sales were better than the fourth quarter of 2018. In total, residential sales grew by 23.77 percent. Small and big houses group increased by 30.13 percent and 24.56 percent respectively. Meanwhile, the medium house group rose the lowest by 13 percent.

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