Bali Property Tax: What You Need to Know Before You Buy a Property in Bali

Before investing in Bali property, it’s crucial to understand the Bali property tax system and its implications. In this article, we will explore everything you need to know about Bali property tax.

Taxation in Indonesia

A person is considered a tax resident of Indonesia if they meet one of the criteria listed below:

• They have resided in the country for 183 days within one calendar year.
• They have spent less than 183 days in the country but intend to stay. Intent can be expressed through obtaining a work visa or a work permit with a duration exceeding 183 days.

In Indonesia, residents are required to file their tax returns independently. Of course, there are many legally registered tax consultants in the country that expatriates can turn to for assistance. However, having a good understanding of at least the basic aspects will help you structure your budget.

Tax Rates

All tax residents are subject to progressive income tax, meaning the higher your earnings, the higher the percentage deducted from your income. The rate varies from 5 to 35% depending on income.

Currently, your income falls into one of the following brackets:

• Up to IDR 60 million (USD 3,864) per year – 5%;
• IDR 60 to 250 million (USD 3,864 to 16,100) per year – 15%;
• IDR 250 to 500 million (USD 16,100 to 32,200) per year – 25%;
• IDR 500 million to 5 billion (USD 32,200 to 322,000) per year – 30%;
• Above IDR 5 billion (USD 322,000) per year – 35%.

Taxable income

Practically all forms of income received by tax residents are considered taxable. According to Article 4 of Chapter 3 of the Personal Income Tax Law, these include:

• Employment income;
• Income from the exercise of an independent profession or business;
• Passive income (dividends, interest);
• Capital gains (from the sale or transfer of property);
• Rental and any other income related to the use of property.

Taxation for Non-Residents

Non-residents are subject to a flat rate of 20%. They pay only for income derived from Indonesian sources, while residents must report money earned outside the country. Double taxation can be avoided if there is an applicable agreement between Indonesia and your home country. There are currently 71 of such agreements.

Taxpayer Registration Procedure

Before filing a tax return, you must register with the tax office in your city of residence to obtain a NIK (National Identity Number).

You can hire a representative (such as an accountant) to help with registration, but the responsibility still rests with you. If you decide to appoint an agent, keep in mind that you will be legally liable for any unpaid taxes, so entrust this function to a reliable and trustworthy professional.

To register, you need to have the following documents:

• Completed tax registration form;
• Copy of all pages of your passport;
• Copy of your work permit;
• Proof of address—yours and your employer’s;
• Copy of your employer’s Tax Identification Number (NPWP);
• Power of attorney (if you send a representative for registration).

Tax Obligations

Indonesian residents must report their income by filing 2 types of returns:

• Monthly individual income tax;
• Annual individual income tax.

For individual taxpayers, the deadline for monthly payment is usually the 15th of the following month. Monthly returns must be submitted no later than the 20th of the following month. For annual filing, the deadline is the end of the 3rd month after the end of the tax year.

It is essential to keep track of these dates as late payment can result in interest penalties, starting at 2% and reaching up to 48% per month.

National Identity Number (NIK)

One of the most important things to do before filing a tax return is obtaining a NIK. All individuals residing in Indonesia must have this document. The same rule applies to residents living outside the country.

Once you get your NIK from the tax office, you can pay monthly income taxes, file annual returns, and more. Here are some of the activities for which you will need a NIK:

• Obtaining a driving licence;
• Opening a bank account;
• Applying for a loan or credit card;
• Purchasing a car;
• Constructing a house;
• Extending vehicle registration;
• Transferring money from an Indonesian bank account to an overseas account.

Penalties for not having a NIK can be severe, so be sure to obtain one as soon as possible. Delinquent taxpayers risk imprisonment for up to 6 years, and the maximum fine under this section is up to 4 times the total amount of tax due.

What is Bali Property Tax?

All property owners in Bali are required to pay Bali property tax, regardless of their nationality or residency status. This includes individuals, companies, and other legal entities that own or possess properties in Bali. Even if the property is used solely for personal use and not generating any income, Bali property tax still applies. However, some exemptions and deductions are available for low-income earners, religious institutions, disabled people, and other eligible groups.

Foreigners who own property in Bali are also subject to Bali property tax and must comply with the regulations to avoid any legal consequences.

Failure to pay Bali property tax can result in penalties, fines, and legal action by the government. It’s essential for property owners in Bali to understand the Bali property tax system and comply with the regulations to avoid any legal consequences.

Types of Bali Property Taxes

Land and Building Tax (PBB)

Land and Building Tax (PBB) is a tax levied on properties in Indonesia, including Bali, based on their assessed value. PBB is divided into two types of taxes: Land Tax (Pajak Bumi) and Building Tax (Pajak Bangunan). The Land Tax is imposed on the value of the land, while the Building Tax is imposed on the value of the building. The assessment is based on factors such as the location, size, and type of property, and is determined by the local government.

The tax rate for PBB is set by the central government and varies depending on the assessed value of the property. Property owners must pay PBB annually, and failure to do so can result in penalties and fines.

Working with a professional and experienced property agent or lawyer can help ensure that all relevant taxes and regulations are properly addressed in the transaction process.

Luxury Goods Sales Tax (PPnBM)

PPnBM is a one-time tax that is paid by the buyer or importer of the luxury goods. The tax rate for PPnBM varies depending on the type of luxury goods and their value. The tax is levied on the sale of new vehicles, motorcycles, yachts, private jets, and other luxury goods.

Luxury Goods Sales Tax (PPnBM) can also be relevant in the context of Bali property sales, especially for high-end properties such as villas and luxury apartments. If the property being sold is considered a luxury property under Indonesian tax regulations, PPnBM may apply. This means that the buyer will need to pay a one-time tax based on the property’s assessed value.

The PPnBM rate for luxury properties is typically higher than the standard property tax rate.

Value-Added Tax (PPN)

Value-Added Tax (PPN) is a tax levied on goods and services in Indonesia, including Bali. In the context of Bali property sales, PPN is applicable to certain types of transactions, such as the sale of commercial properties and leasehold agreements.

PPN is set at a rate of 11% of the transaction value and is usually borne by the buyer. However, in some cases, the seller may agree to absorb or share the PPN cost with the buyer.

Property buyers and sellers in Bali should be aware of the PPN regulations and ensure that they are properly addressed in the transaction process.

Transfer Tax (BPHTB)

Transfer Tax, also known as Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB) in Indonesia, is a type of tax imposed on the transfer of ownership or rights to land and buildings. BPHTB is a local tax that is typically regulated and collected by local governments or municipalities in Indonesia. This tax is applicable when there is a change in property ownership, which can occur through various means, including:

1. Buying and selling real estate: When someone purchases a property, whether it’s land, a house, or a building, they are usually required to pay BPHTB based on the property’s transaction value.
2. Inheritance: In cases where a property is inherited, the heirs may be subject to BPHTB based on the property’s value at the time of inheritance.
3. Donations: If someone donates a property to another individual or entity, the recipient may be liable to pay BPHTB based on the property’s value.

Income Tax (PPh)

In Bali, Indonesia, income tax or PPh (Pajak Penghasilan) is a crucial aspect of property sales. When a property is sold, the seller is subject to pay PPh on the capital gain that they receive from the transaction.

The capital gain is calculated as the difference between the selling price and the initial cost of the property, plus any relevant expenses incurred during the sales process. The PPh rate varies depending on the length of ownership of the property and the Indonesian tax regulations applicable at the time of the sale.

Foreigners who own property in Bali are also subject to PPh and may have to pay additional taxes related to their status as non-resident taxpayers.

Bali Property Tax FAQs

• Who is Responsible for Paying Property Tax in Bali? Property owners are generally responsible for paying property tax in Bali. This includes both Indonesian citizens and foreigners who own property in the region.
• Do I have to pay property tax if I’m not generating rental income from my villa?
  In most cases, yes. Property tax is generally levied on all properties, regardless of whether they are used for personal or rental purposes.
• How can I determine the assessed value of my villa for property tax purposes?
  The assessed value is determined by the local tax office. They consider factors such as location, size, and condition of the property.
• Are there any tax incentives for villa owners in Bali?
  Some properties may be eligible for tax incentives or exemptions, especially if they serve specific purposes, such as promoting tourism or cultural heritage. These exemptions and discounts are subject to local regulations and eligibility criteria.
• When and How Do I Pay Property Tax in Bali? Property tax payments are typically due annually and can be paid at local tax offices or through designated payment channels. The due date can vary, so it’s essential to check with local authorities.
• What happens if I fail to pay my property tax on time?
  Late payments may result in penalties and legal actions. It’s essential to adhere to the payment deadlines to avoid such consequences.
• Is it advisable to hire a tax consultant for property tax matters in Bali?
  Yes, many villa owners opt to work with tax consultants or services to ensure compliance and minimize tax liabilities.
• Can Foreigners Own Property in Bali? Foreigners are generally not allowed to own land in Bali. However, they can obtain the right to use land through long-term leases or by forming a local company with Indonesian partners.
• What is the Role of a Notary in Property Transactions in Bali? Notaries play a crucial role in property transactions in Bali, as they help ensure the legality and validity of property transfers. They can also provide guidance on tax-related matters.
• Can I Appeal the Property Tax Assessment in Bali? Yes, property owners have the right to appeal their property tax assessment if they believe it is incorrect. This process typically involves submitting a formal appeal to the local tax office.

Disclaimer

Please note that property tax regulations can change over time, and it’s essential to consult with local authorities and professionals who specialize in Bali property tax matters to get the most up-to-date and accurate information.

The content of this article is intended to provide a general guide to the subject matter. It is not intended to be comprehensive nor does it constitute legal or tax advice. We are not a legal advisor or a tax consultant and we do not provide any legal or tax services. You should seek professional advice before acting or refraining from acting on any of the content of this article.