Final Income Tax is a tax charged based on a tax rate and a certain tax base on a received income by the Tax Subject during the year which its payment is fully deposited by the time it is received so that the taxpayer is deemed to have paid off their tax obligations.
One sampleof final income tax under the Income Tax Law is an income from transfer of assets such as land and/or building, construction service business, real estate business, and renta on land and/or building.
Tax Subject and Tax Object
- Tax Subject includes:
Individual as a tax subject may reside in Indonesia or outside Indonesia who transfers his/her right of land and/or building.
Entity is a group of people and / or capital as a union whether or not doing any business activities that transfers the right of land and / or building.
Tax Subject is required to have a Tax Registration Number, except for individuals whose income is under Non-Taxable Income.
- Tax Object includes:
- Transfers through sales, exchanges, waivers, delivery of rights, auctions, grants, inheritance, or other means as agreed between the parties.
- An Income from conditional sale and purchase agreement (CSPA) of land and/or building and its amendments received by the seller whose name is stated in the CSPA when it was signed at the first time or the buyer whose name is stated in the CSPA before its amendment or addendum
Tariff for the Transfer of Right of Land and/or Building due to the Transfer or CSPA and its Amendments
- Transfer of right of land and/or building
Transfer of right of land and/or building other than simple house or simple apartment by taxpayer whose principal business is doing the transfer of right of land and/or building is subject to a tariff of 2.5% of the gross amount of the transfer value.
- Transfer of right of land and/or building in the form of Modest House and Modest Apartment
Transfer of right of land and/or building in the form of Modest House and Modest Apartment by Taxpayer whose main business is doing the transfer of right of land and/or buildings is subject to tariff of 1% of the gross amount of the transfer value.
- Transfer of right of land and/or building to the government
The transfer of right of land and/or building to the government related to development for public interest is subject to a tariff of 0%.
Here are the criteria for a modest house and a modest apartment based on Minister of Finance Regulation Number 36/PMK.03/2007 on the Limitation of Modest Houses, Very Modest Houses, Modest Apartment, Lodge, Student Dormitories, and Other Housing which is freed from Value Added Tax as amended by Minister of Finance Regulation Number 80 / PMK.03 / 2008 and the latest amended by Minister of Finance Regulation Number 113 / PMK.03 / 2014:
- Modest House
- building area does not exceed 36 m2;
- the selling price does not exceed the sale price limit provided that it is based on a combination of zones and the corresponding year as stated in the attachment of the regulation. As for a limit of its selling prices in 2018, as follows;
- Java: Rp 130.000.000
- Sumatra: Rp 130.000.000
- Kalimantan:Rp 142.000.000
- Sulawesi: Rp 136.000.000
- Maluku and North Maluku: Rp 148.500.000
- Bali and Nusa Tenggara: Rp 148.500.000
- Papua and West Papua: Rp 205.000.000
- Riau Island and Bangka Belitung: Rp 136.000.000
- it is the first house owned, self-used as residence and not transferred within a period of 5 (five) years from the time it is owned;
- the land area is not less than 60 m2;
- it is acquired by cash or financed through subsidized or non-subsidized credit facility or through sharia-based financing.
Whereas the Minister of Finance Regulation Number 269/PMK.010 / 2015 regulating the criteria of residential units of Modest Apartment, as follows:
- Modest Apartment
- its acquired by credit/financing of subsidized house ownership;
- building area does not exceed 36 m2;
- its construction refers to the Regulation of the Minister of Public Works and Public Housing;
- it is the first residence owned, self-used as residence and is not transferred according to a period that regulated in Condominium Laws;
- the selling price does not exceed Rp. 250 million;
- as for person whose monthly income does not exceed Rp 7 million;
- it is multi-floors building that is built in an environment that is used as a residence supplemented with bathroom/toilet and the kitchen, integrated or separated from residence unit that can be used jointly
Value of Transfer of Right of Land and/or Building due to Transfer or CSPA.
Prior to the issuance of Government Regulation No. 34/2016, the transfer value would be based on the highest value between the transaction value and sale value of the tax object (NJOP). Nevertheless, the transfer for right of land and/or building in the current regulation is the following:
- In case of transfer of right to the government, its value is based on the decree of the authorized official
- In case of auction, its value is based on the Minutes of Auction in accordance with auction regulations and its amendments.
- In case of transfer through sale and purchase without any special relationship, its value is based on the value it has actually been received or obtained
- In case of transfer through sale and purchase with special relationship, its value is based on the value it should have been received or obtained;
- In case of transfer through exchanges, waivers, delivery of rights, grants, inheritance, or other means as agreed between the parties, its value is based on the value it should have been received or obtained.
Under the Income Tax Law and Value-Added Tax Law on Goods and Services and Sales over Luxurious Goods along with their respective changes, the special relationship means:
- The taxpayer has a direct or an indirect investment to other Taxpayers at least 25% (twenty-five percent):
- Control through management or use of technology even though there is no relationship of ownership. Special relationship is considered to exist if one or more companies are under the same control;
- There is family relationship both blood and related by marriage in a straight line of one degree and / or one degree aside.
- The transfer of right of land and/or building by an individual or entity not to the Government whose transfer is the principal business of the taxpayer, then the tax is payable when received in whole or in a part for payment of the transfer of right of land and/or building;
- The transfer of right of land and/or building by an individual or entity not to the Government whose transfer is not the principal business of the taxpayer, then the tax is payable before the deed, decree, agreement or minutes of the auction are signed by the competent authority;
- Transfer of right of land and/or building by an individual or entity to the government conducted by the taxpayer, the tax is payable before the deed, decision, agreement or minutes of auction are signed by the competent authority.
The income tax over the transfer of right through CSPA is payable before the occurrence of amendment or addendum of CSPA.
- Payment and Maturity
- For the transfer of right of land and/or building conducted by the taxpayer not to the government, the income tax is calculated based on the amount of each payment including advances, interest, levies and other additional payments fulfilled by the buyer in connection with the transfer of right of land and/or the building. Income tax is paid by the taxpayer at the latest on the 15th day of the following month when the payment was received through a counter and/or other electronic systems at the bank/postal perception;
- For the transfer of right of land and/or building is conducted by the taxpayer to the government, the tax is collected by the government treasurer or officials who agrees on the exchange without having to fill in the Tax Deposit Letter;
- For the transfer of right of land and/or building through the CSPA, the tax payment is made for each agreement of land and or building which is self-paid by an individual or entity as the buyer and of which their name is listed in CSPA prior to its amendment or addendum, no later than the 15th of the following month after the payment is received and/or other electronic systems at bank/perception posts.
Exception of Final Income Tax for the Transfer of Right of Land and/or Building.
The following are the events that exempt payment on income tax for the transfer of right of land and/or building:
- Transfer by an individual with an income below the Non-Taxable Income;
- Transfer due to grants by an individual or an entity as long as the grants do not have a relationship with business, employment, ownership, or control between the parties;
- Transfer due to inheritance;
- Transfer based on book value or asset value deducted by an amount of depreciation value charged over the age of the use of the assets that conducted by an entity in merger, consolidation or business expansion as determined by the Minister of Finance
- Transfer by an individual or an entity conducting the transfer of asset in the form of building in build-operate-transfer, build-transfer-operate, or the utilization of state-owned assets such as land and/or building
- Transfer made by non-tax subjects.
Reporting Obligations to the Directorate General of Taxes
- Officials authorized to sign deeds, decrees, agreements or minutes of auction that include Land Conveyancing Officer, auction officials, or other officials in accordance with laws and regulations must report the transfer of right of land and/or buildings on a month basis related to the issuance of deeds, decrees, agreements or auction minutes, no later than 20 days after the month of occurrence of transfer of right.
- Government’s treasurer or officials who agree to exchange must report the transfer of right of land and/or building, no later than 20 days after the month of occurrence of transfer of right.
- The seller listed in the amendment/addendum of CSPA is required to report its amendment or addendum no later than 20 days after the tax period ends.
- Individual or entity must report the received income no later than 20 days after the tax period ends.
The tax period is the period of time for the taxpayer to calculate, deposit and report taxes that are payable within a determined period of time.
Prohibition of Signing of Transfer Documents by Officials Authorized
Authorized officials may only sign the deed, decision, agreement or Minutes of Auction if the tax has been paid by the taxpayer and after the issuance of Formal Inspection of the Fulfillment Liability Proof to Income Tax Payment Letter by bringing its copies to the respective officials.
- If the taxpayer does not submit the Tax Return in accordance with the stipulated period, then the taxpayer is imposed with administrative sanctions in the form of a fine of Rp. 100,000.00.
- Late payment of tax is subject to administrative sanction, in the form of interest of 2% (two percent) per month that calculated from due date of tax payment until the date of payment.
- If the Taxpayer does not have the Tax Identification Number and not paying the taxes that it can cause losses to state’s revenues is subject to criminal sanctions in the form of imprisonment at least 6 (six) months and a maximum of 6 (six) years and a fine of at least 2 (two) times and at most 4 (four) times the amount of tax payable that is not or is underpaid.
Submission of Compliance Application of Proof Inspection on Fulfillment of Liability for Income Tax Payments on Land and/or Building
- Taxpayer must submit the application of proof inspection on fulfillment of liability for income tax payments to the Tax Office. Its inspection includes formal and material inspection.
- The application file that must be completed by the taxpayer is an application letter and a list of income tax payments
- Submission of documents can be made manually or electronically
- One application for several objects and multiple payments (payment data is in one attachment)
- Letter of Formal Inspection of the Fulfillment Liability Proof to Income Tax Payment is issued within 3 business days for the amount of payment evidences up to 10 proofs and 10 working days for the total payment of more than 10 proofs.
Kristina Kristioni Keintjem