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INDONESIA: Luxury Property Sales Tax Cut in Bid to Jumpstart Real Estate Sector

The tax on the sale or transfer of luxury property priced at Rupiah 30 billion (US$2.1 million) or more has been cut on 19 June 2019 from 5% to 1%. The change is a part of recent amendments to the country’s Luxury Goods Tax Policy (PPnBM). The sale of luxury cars (priced at Rupiah 2 billion), motorcycles (priced at Rupiah 300 million), yachts and private aircrafts will continue to be taxed at 5%.

Among a number of other key changes, the threshold for the 20% luxury tax surcharge on the purchase of property has been raised to Rupiah 30 billion across all categories of high-end residences. Previously, the 20% tax surcharge applied to all purchases of apartments and condominiums priced at Rupiah 10 billion (US$700,000) and above, as well as all purchases of luxury houses with land valued at Rupiah 20 billion (US$1.4 million) and above.

The move to reduce the income tax on the sale of luxury property, as well as to raise the tax surcharge threshold, come as part of a government bid to stimulate growth in the country’s sluggish property sector. The luxury tax, which was first introduced for residential property in 2017, is seen as having led to subdued sales, as well as to a decline in investment in luxury property projects.

The government also expects the changes to have a multiplier effect on a number of ancillary sectors, including the manufacture of cement, ceramic tiles, furniture, electronic appliances and electrical equipment. This, in turn, is expected to spur the country’s overall economic growth. The latest changes are also likely to open up new opportunities for Hong Kong entrepreneurs looking to invest in the country’s property market, as well as for those Hong Kong suppliers able to meet the expected increase in demand for real estate and construction sector inputs.

Content provided by Picture: HKTDC Research
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