Requirements For Buying Real Estate Property in Indonesia

You may not need to think of Indonesia as a lucrative location for setting up an offshore business. But, the Indonesian law may open up new doors for your business opportunities. Feel free to contact us for more information, or check the links below for more reading on this topic. The Indonesian government is continuously striving to improve its tax laws for businesses from overseas. We will continue to provide you with updated information on any changes to this area of law. The Indonesian government is currently undergoing reforms to the licensing and tax system in an effort to simplify the procedures of conducting business, increase tax revenues, encourage investment and protect the economic interests of the nation.Indonesian Tax Law

 

As an individual working offshore, you will probably be required to pay some type of withholding tax. The withholding tax is normally based upon your place of residence. In Indonesia, you will not be required to withhold tax if you are a tax resident by birth. If you are a tax non-resident by choice, then you would be required to withhold tax based upon your residence. It is important to note that if you are a tax resident, then you are not liable to any kind of UDR or tax withholding penalties. A representative office would be able to further help you understand the requirements of your financial status in Indonesia.

The Indonesian tax laws also include a special tax called “ROK KORO”. The ROK KORO tax is applicable only to corporations and limited liability companies. An offshore business formation may not require you to pay any kind of tax to register or transact business in Indonesia. However, to avoid paying the unnecessary and hefty ROK KORO tax, consult with a representative office and/or accountant experienced with handling Indonesian companies.

One of the most important considerations when buying property in Indonesia is the kind of property you plan to purchase. In Indonesia, property purchased within the private and proprietary properties are exempt from local tax. This means that under Indonesian law, a buyer of a property can use the property as he sees fit. The buyer does not have to pay for any kinds of taxes on the property acquired. There are exceptions to this general rule.

When a buyer purchases real estate in Indonesia and later wishes to convert it into an investment property, he has to pay both personal income tax and commercial tax. There are two kinds of Indonesian company: private and public. Private i.e. non-residential companies are generally exempt from paying income tax. On the other hand, in case of public companies, they need to pay both personal income tax and commercial tax.

Private individuals and non-residents have different tax purposes. A private individual pays tax on his income and dividends and also on capital gains. On the other hand, a non-resident individual or a company pays tax on its income and profits only. The latter’s income and profits are taxed only once. But the former cannot adopt the offshore system for tax purposes.

Under Indonesian law, there are some conditions that a buyer needs to fulfill before being able to purchase property in Indonesia. The first and most important condition that a buyer has to fulfill is the need to have minimum capitalization. Minimum capitalization is defined as the amount of money that a buyer needs to deposit in order to purchase a certain property. Borrowers who fail to satisfy the conditions may not be allowed to buy residential property in Indonesia.

If a person or an organization fails to fulfill the conditions imposed by Indonesian law, he can be subjected to penalty charges. However, even if a person or an organization fulfills the conditions, he still can be subject to tax losses. These losses are however, limited to those which resulted from tax violations. In addition to that, buyers must also comply with Indonesian law in terms of purchasing property in Indonesian. This is because violating Indonesian law may also lead to penalties or criminal charges

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