BDO Indirect Tax News

In an effort to invigorate the housing market and stimulate sales, the Indonesian government will temporarily bear the VAT on certain residential housing purchases. The VAT rate on housing purchases in Indonesia is 11%, which can be an impediment to persons wishing to purchase a residence. The Minister of Finance (MoF) recently issued a regulation (MoF regulation No. 120 Year 2023), which applies to the delivery of “landed houses” and flats as from 1 November 2023 and sets out the requirements to benefit from the incentive.

The VAT subsidy will be available from 1 November 2023 to 31 December 2024, with the amount being 100% for home sales completed during the period 1 November 2023 to 30 June 2024 and then dropping to 50% for the remaining period.

Requirements to benefit from the VAT incentive

The VAT incentive applies to individual purchasers, both Indonesian citizens and foreigners, provided the following requirements are met:

• The maximum sales price of landed and flat houses is IDR 5 billion (approximately USD 323,000). IDR 2 billion is eligible for the incentive, but the remaining portion is subject to the 11% VAT rate, which must be paid by the purchaser;
• The home purchase is completed during the period 1 November 2023 through 31 December 2024, with completion evidenced by a binding sale and purchase agreement or signed sale and purchase deed;
• The property is transferred from a developer directly to an individual purchaser in ready-to-use condition; and
• The property benefiting from the VAT incentive is not transferred within one year.

If a buyer made a down payment or instalment payment on the purchase before 1 November 2023, the VAT incentive will be available only on the remaining VAT payable on the repayment and/or instalment after that date up to 31 December 2023 but the property can be handed over by the developer to the purchaser at the latest by 31 December 2024.

Irwan Kusumanto
Suwenny Leonardi
BDO in Indonesia